<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended October 25, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-66412
APS HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 76-0306940
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15710 JOHN F. KENNEDY BLVD., SUITE 700
HOUSTON, TEXAS 77032-2347
(Address of Principal Executive Offices)
(713) 507-1100
(Registrant's telephone number, including area code)
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 X No
--- ---
There were 13,764,327 shares of the Registrant's Class A Common Stock
outstanding as of the close of business on December 3, 1996. There were no
shares outstanding of the Registrant's Class B Common Stock.
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APS HOLDING CORPORATION
Page
Number
------
PART I. FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements and Notes 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K 15
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
APS HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
___________
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS OCTOBER 25, 1996 JANUARY 27, 1996
---------------- ----------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 12,556 $ 7,886
Accounts and notes receivable, less allowance of $8,597 and $5,048 . 116,028 120,848
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305,345 295,379
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . 12,919 13,390
Prepaid expenses and other current assets . . . . . . . . . . . . . . 23,160 30,817
--------- ----------
Total current assets . . . . . . . . . . . . . . . . . 470,008 468,320
Property and equipment, less accumulated depreciation
of $23,719 and $20,463 . . . . . . . . . . . . . . . . . . . . . . . 43,206 40,777
Notes receivable, less current portion . . . . . . . . . . . . . . . . 24,170 26,235
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . 47,971 50,627
Investment in available for sale securities . . . . . . . . . . . . . . 2,500 -
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . 3 681
Deferred costs and other assets . . . . . . . . . . . . . . . . . . . . 15,562 13,519
--------- ----------
$ 603,420 $ 600,159
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,229 $ 8,314
Current maturities of long-term debt . . . . . . . . . . . . . . . . 14,978 13,453
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 108,360 103,214
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 39,542 40,655
--------- ----------
Total current liabilities . . . . . . . . . . . . . . . 170,109 165,636
Long-term debt, less current maturities . . . . . . . . . . . . . . . . 291,649 302,512
Deferred income and other liabilities . . . . . . . . . . . . . . . . . 4,095 7,981
--------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . 465,853 476,129
--------- ----------
Commitments and contingencies (Note 4) . . . . . . . . . . . . . . . . - -
Stockholders' equity:
Class A common stock . . . . . . . . . . . . . . . . . . . . . . . . 137 137
Class B common stock . . . . . . . . . . . . . . . . . . . . . . . . - -
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 155,008 154,889
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (17,458) (30,876)
Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . (120) (120)
--------- ---------
Total stockholders' equity . . . . . . . . . . . . . . 137,567 124,030
--------- ---------
$ 603,420 $ 600,159
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
APS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
______________
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 25, OCTOBER 25,
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 217,592 $ 160,329 $ 669,463 $ 453,258
Cost of goods sold . . . . . . . . . . . . . 139,350 103,643 433,730 294,975
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . 78,242 56,686 235,733 158,283
Selling, general and administrative expenses 64,233 45,881 199,546 127,334
--------- --------- --------- ---------
Operating income . . . . . . . . . . . . 14,009 10,805 36,187 30,949
Interest income . . . . . . . . . . . . . . . 1,441 1,301 4,253 3,888
Other income . . . . . . . . . . . . . . . . 1,085 383 1,408 1,150
--------- --------- --------- ---------
Income before interest expense and
income taxes . . . . . . . . . . 16,535 12,489 41,848 35,987
Interest expense . . . . . . . . . . . . . . 6,846 4,053 20,529 11,755
--------- --------- --------- ---------
Income before income taxes . . . . . . . 9,689 8,436 21,319 24,232
Provision for income taxes . . . . . . . . . 3,589 3,013 7,901 8,990
--------- --------- --------- ---------
Net income . . . . . . . . . . . . . . . $ 6,100 $ 5,423 $ 13,418 $ 15,242
========= ========= ========= =========
Net income per share . . . . . . . . . . . . $ 0.44 $ 0.39 $ .97 $ 1.10
========= ========= ========= =========
Weighted average common shares outstanding . 13,941 13,906 13,904 13,909
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
APS HOLDING CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 25, 1996
______________
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A
COMMON STOCK ADDITIONAL TREASURY TOTAL
---------------- PAID-IN ACCUMULATED STOCK, STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT AT COST EQUITY
------ ------ ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period . . 13,728 $ 137 $ 154,889 $ (30,876) $ (120) $ 124,030
Exercise of stock options . . . . 21 - 119 - - 119
Net income for the period . . . . - - - 13,418 - 13,418
------ ----- --------- --------- ------ ---------
Balance at October 25, 1996. . . . 13,749 $ 137 $ 155,008 $ (17,458) $ (120) $ 137,567
====== ===== ========= ========= ======= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
APS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
______________
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 25, 1996 OCTOBER 25, 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,418 $ 15,242
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . 8,623 6,056
Amortization of debt issue costs . . . . . . . . . . . . . . . . 590 712
Gain on sale of stores . . . . . . . . . . . . . . . . . . . . . (1,035) -
Provision for bad debts . . . . . . . . . . . . . . . . . . . . 4,000 2,518
Income from supply agreement . . . . . . . . . . . . . . . . . . (373) (1,150)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 1,149 5,234
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . 965 (17,586)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . (4,078) (36,780)
Prepaid expenses and other current assets . . . . . . . . . 7,731 (4,633)
Accounts payable . . . . . . . . . . . . . . . . . . . . . 5,146 14,312
Accrued liabilities . . . . . . . . . . . . . . . . . . . . (1,142) (530)
Other assets and liabilities . . . . . . . . . . . . . . . (8,806) (2,085)
------ ------
Net cash provided by (used in) operating activities . . . 26,188 (18,690)
------ -------
Cash flows from investing activities:
Investment in notes receivable . . . . . . . . . . . . . . . . . . . (5,365) (6,142)
Proceeds from repayment of notes receivable . . . . . . . . . . . . 6,819 1,626
Investment in available for sale securities . . . . . . . . . . . . (2,500) -
Business acquisitions, net of cash acquired . . . . . . . . . . . . (7,035) (11,498)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (7,668) (6,126)
Proceeds from sale of stores and other assets . . . . . . . . . . . 4,535 -
----- ---------
Net cash (used in) investing activities . . . . . . . . . (11,214) (22,140)
------- ---------
Cash flows from financing activities:
Change in book overdrafts . . . . . . . . . . . . . . . . . . . . . (1,085) -
Net borrowings under revolving credit agreement . . . . . . . . . . 800 53,500
Retirement of long-term debt . . . . . . . . . . . . . . . . . . . . (10,138) (8,732)
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . 119 28
Debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . - (512)
--------- ---------
Net cash (used in) provided by financing activities . . . (10,304) 44,284
--------- ---------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . 4,670 3,454
Cash and cash equivalents at beginning of period . . . . . . . . . . . 7,886 15
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . $ 12,556 $ 3,469
========= =========
Supplemental disclosures:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . $ 15,477 $ 11,073
========= =========
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . $ 2,547 $ 5,281
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
APS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________
1. BASIS OF PRESENTATION:
The consolidated balance sheet of APS Holding Corporation and
subsidiaries (the "Company") at January 27, 1996 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at October 25, 1996, the consolidated statements of
operations for the three and nine months ended October 25, 1996 and 1995, the
consolidated statement of changes in stockholders' equity for the nine months
ended October 25, 1996 and the consolidated statements of cash flows for the
nine months ended October 25, 1996 and 1995 have been prepared by the Company,
without audit. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the consolidated
financial position, results of operations and cash flows have been made. The
results of operations for the three months or nine months ended October 25,
1996 are not necessarily indicative of the operating results for a full year or
of future operations.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been omitted. The accompanying consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the Company's Annual Report on Form 10-K for the
year ended January 27, 1996.
2. NEW ACCOUNTING STANDARD:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, entitled "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" ("SFAS No. 125"), in
August 1996. The Company is required to adopt the accounting rules of SFAS No.
125 for certain transactions occurring after December 31, 1996. The adoption
of SFAS No. 125 is not expected to have a significant impact on the Company's
financial position or results of operations.
3. COST TO EXIT ACTIVITIES:
On January 25, 1996, the Company acquired all of the outstanding stock
of Parts, Inc. ("PI") from GKN Parts Industries Corporation (the "PI
Acquisition"). Selling, general and administrative expenses for the three
months and nine months ended October 25, 1996 have been reduced by one-time
supplier changeover incentives in the amount of approximately $5.7 million and
$7.9 million, respectively. Such incentives were or will be received in
connection with the PI Acquisition to offset the impact of expenses related to
the integration of PI into the Company.
Since the PI Acquisition, the Company has implemented a comprehensive
plan for integrating PI's operations and administrative functions with those of
the Company. Such plan entails the closure of certain PI distribution centers
and stores and consolidation of these operations into the Company's remaining
facilities, as well as the consolidation of certain administrative functions.
The Company's financial statements at January 27, 1996 included a liability and
reserves of $9.2 million for costs related to such plan. During the nine
months ended October 25, 1996, the Company charged approximately $4.6 million
against such liability. Such charge consisted of approximately $3.8 million to
close facilities (including approximately $1.6 million of employee termination
and relocation costs) and approximately $0.8 million for lease and related
obligations.
In connection with the PI Acquisition, the Company also embarked upon
a program during the fourth quarter of the fiscal year ended January 27, 1996
to review and rationalize its facilities. In conjunction with such program,
and
7
<PAGE> 8
APS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________
in order to achieve its operating performance objectives, the Company is in the
process of consolidating redundant operating and administrative facilities,
owned by the Company prior to the PI Acquisition, into existing facilities and
closing other nonperforming facilities. The Company has obtained a majority of
the program's objectives during the nine months ended October 25, 1996 and
expects completion of the program during the fiscal year ending January 31,
1998. The Company's financial statements at January 27, 1996 included a
liability in the amount of $5.5 million for costs related to such program,
including approximately $0.5 million of employee severance benefits related to
personnel reductions of approximately 300 employees, primarily warehouse and
store personnel. During the nine months ended October 25, 1996, the Company
charged approximately $2.4 million of consolidation costs against such
liability. Such costs included approximately $1.3 million to close facilities
(including approximately $0.1 million of employee severance benefits for 129
terminated employees) and approximately $1.1 million for lease and related
obligations.
4. LITIGATION:
The Company is involved in various claims and disputes arising in the
normal course of business. One such case involved the matter of Jo M. Smith et
al v. A.P.S., Inc. et al, which was filed in July 1994 in the District Court of
Harris County, Texas. The plaintiffs (four former and one existing employee)
claimed to have been the recipients of acts of intimidation and/or retaliatory
conduct as a result of their filing of workers' compensation claims and filed
this suit against the Company and one of its officers under various sections of
Texas state statutes prohibiting such actions claiming aggregate specified
actual damages of $3.2 million, punitive damages of $6.3 million and damages
for emotional distress in the amount of $5.0 million. Such suit was settled
during the quarter ended July 25, 1996 for an aggregate $350,000 payment to the
plaintiffs and is reflected in the Company's net income for the nine months
ended October 25, 1996.
In addition, the Company became a party to a number of pre-existing
litigation matters and claims as a result of the PI Acquisition. Among those
cases is the matter of Karon S. Adkisson v. GKN Parts Industries Corporation
(the "Adkisson Case"), a suit pending in the United States District Court for
the Western District of Oklahoma. The plaintiff, a former employee of PI,
alleged several claims against PI, including violation of Title VII of the Civil
Rights Act of 1964 and the negligent retention and supervision of its employees
as a result of being raped by a fellow employee, who has been convicted of that
crime. This matter was resolved during the quarter ended October 25, 1996 with
a structured settlement at a cost of $395,000. Such amount was charged against
a reserve created at the time of the PI Acquisition for litigation related
matters and, therefore, had no impact upon the Company's results of operations
for the periods ended October 25, 1996.
5. RETIREMENT PLAN:
Effective September 1, 1996, the Company implemented the A.P.S., Inc.
Executive 401(k) Deferral Plan (the "Deferral Plan"), a defined contribution
plan covering a group of key management employees who also participate at the
maximum contribution level of 3% in the Company's previously existing defined
contribution plan, the A.P.S., Inc. Partnership Plan (the "Partnership Plan").
Participants in the Deferral Plan may contribute up to 28% of their annual
compensation, in addition to their contribution to the Partnership Plan. Such
contributions will be matched 50% by the Company up to 6% of the participants'
combined contributions to both plans. Participants' vesting rates in the
Partnership Plan carry over to the Deferral Plan and participants become fully
vested in the Company's contributions to both plans after five years.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Presented below is a summary of unaudited financial operating
information for the three and nine months ended October 25, 1996 and 1995
(dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 25, NINE MONTHS ENDED OCTOBER 25,
---------------------------------- ---------------------------------
1996 % 1995 % 1996 % 1995 %
--------- ----- --------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 217,592 100.0 $ 160,329 100.0 $ 669,463 100.0 $ 453,258 100.0
Cost of goods sold 139,350 64.0 103,643 64.6 433,730 64.8 294,975 65.1
Gross profit 78,242 36.0 56,686 35.4 235,733 35.2 158,283 34.9
Selling, general and administrative expenses 64,233 29.5 45,881 28.6 199,546 29.8 127,334 28.1
Operating income 14,009 6.4 10,805 6.7 36,187 5.4 30,949 6.8
Net income 6,100 2.8 5,423 3.4 13,418 2.0 15,242 3.4
</TABLE>
The PI Acquisition
On January 25, 1996, the Company purchased all of the outstanding
stock of Parts, Inc. ("PI"), an automotive parts distributor, for a net
purchase price of $74.9 million (the "PI Acquisition").
Fiscal Year 1997 Compared to Fiscal Year 1996
Net sales for the three months and nine months ended October 25, 1996
increased $57.3 million (35.7%) and $216.2 million (47.7%), respectively, from
the corresponding periods of the prior year. Such increase was primarily
attributable to the impact of the PI Acquisition and, to a lesser extent, to
increased sales generated by new Installers' Service Warehouse ("ISW")
locations and increasing sales at less mature ISWs. The sales increase for the
three months ended October 25, 1996 was affected by a general softness in
demand for the Company's products in its traditional businesses (i.e.,
distribution centers and Company-owned stores) and higher than expected returns
of seasonal products as a result of unusually cool summer weather.
Cost of goods sold for the three months and nine months ended October
25, 1996 increased $35.7 million (34.5%) and $138.8 million (47.0%),
respectively, compared to the corresponding periods of the prior year. The
dollar increase in cost of goods sold principally resulted from increased sales
volume generated by the PI Acquisition and the growth of the ISW business.
Cost of goods sold for the three months and nine months ended October 25, 1996
(as a percentage of net sales) decreased slightly compared to that of the
corresponding periods of the prior year principally due to the sales mix
containing more ISW sales, which have higher gross profit margins than the
Company's traditional businesses, partially offset by a decrease in gross
profit margins at the Company's traditional businesses. Such decrease in gross
profit margins at the Company's traditional businesses primarily resulted from
additional sales to jobbers participating in sales programs offering reduced
selling prices and fewer services. The Company intends to continue adding
jobbers to such programs and, consequently, gross profit margins at its
traditional businesses could continue to decrease in future periods.
Selling, general and administrative expenses for the three months and
nine months ended October 25, 1996 increased $18.4 million (40.0%) and $72.2
million (56.7%), respectively, compared to the corresponding periods of the
prior year. The dollar increases in selling, general and administrative
expenses for both the three and nine month periods ended October 25, 1996
principally resulted from increased sales volume generated by the PI
Acquisition and the growth of the ISW business. Selling, general and
administrative expenses (as a percentage of net sales) for the three months and
nine months ended October 25, 1996 increased significantly compared to the
respective prior year periods. Such increases (as a percentage of net sales)
principally resulted from the Company's operation of the PI business (which
currently has higher distribution center operating costs than those of the
Company's other traditional business
9
<PAGE> 10
operations), costs incurred in integrating PI into the Company and, to a lesser
extent, the operation of more ISWs (which have higher operating costs as a
percentage of net sales than the Company's traditional businesses). The Company
plans to continue adding new ISWs as part of its overall business plan and
expects future operating expenses of its ISWs to continue to be higher (as a
percentage of net sales) than the related operating expenses of its traditional
businesses. However, the Company believes that with the consolidation of
certain PI distribution centers into the Company's other facilities and after
completing the integration of PI into the Company, selling, general and
administrative expenses (as a percentage of net sales) for the Company's
traditional businesses should decline in future periods, although no assurance
can be given in this regard. The impact of increased selling, general and
administrative expenses for the three months and nine months ended October 25,
1996 was offset in part by the recognition of one-time supplier changeover
incentives in the amount of approximately $5.7 million and $7.9 million,
respectively. Such incentives were or will be received in connection with the
PI Acquisition to offset the impact of one-time expenses related to the
integration of PI into the Company. The Company currently anticipates that it
may recognize additional changeover incentives during the remainder of this
fiscal year and the first six months of the Company's next fiscal year, although
there can be no assurance that such incentives will actually be recognized.
Operating income for the three months and nine months ended October
25, 1996 increased $3.2 million (29.7%) and $5.2 million (16.9%), respectively,
compared to the corresponding periods of the prior year, primarily due to the
sales increases discussed above and to the PI Acquisition-related supplier
changeover incentives discussed above that helped reduce the impact of expenses
related to the integration of PI into the Company.
Interest income for the three months and nine months ended October 25,
1996 was $1.4 million (0.7% of net sales) and $4.3 million (0.6% of net sales),
respectively, compared to $1.3 million (0.8% of net sales) and $3.9 million
(0.9% of net sales), respectively, for the corresponding periods of the prior
year. Such increases are due primarily to interest income from past due
accounts receivable, partially offset by decreases in interest income resulting
from lower notes receivable balances.
Other income for the three months and nine months ended October 25,
1996 was approximately $1.1 million (0.5% of net sales) and $1.4 million (0.2%
of net sales) compared to $0.4 million (0.2% of net sales) and $1.2 million
(0.3% of net sales), respectively, for the corresponding periods of the prior
year. Other income for the three months and nine months ended October 25, 1996
included a gain of approximately $1.0 million from the sale of certain stores
in Mississippi and Florida. In addition, all four periods include the portion
allocable to such periods of a $6.0 million payment received from a supplier
for entering into a ten year supply agreement in April 1993. Such payment was
deferred and is being recognized as income on an accelerated basis over the
term of the agreement; thus, when compared to previous periods, the amount of
revenue recognized from such payment has declined.
Interest expense for the three months and nine months ended October
25, 1996 was $6.8 million (3.1% of net sales) and $20.5 million (3.1% of net
sales), respectively, compared to $4.1 million (2.5% of net sales) and $11.8
million (2.6% of net sales), respectively, for the corresponding periods of the
prior year. The increase in interest expense for such periods is principally
due to higher borrowing levels resulting from the Company's investment in
acquisitions (primarily the PI Acquisition) and the expansion of its ISW
business. The extent of future increases in interest expense will depend on a
number of factors, including the magnitude of any increases in borrowing
levels, changes in interest rates and the Company's continued access to
sufficient sources of funding for its expansion efforts. The PI Acquisition
was financed through the private placement on January 25, 1996 of $100.0
million principal amount of the Company's 11.875% senior subordinated notes due
2006 (the "Notes"). Also, concurrently with the PI Acquisition, the Company
entered into an amended and restated senior bank credit agreement (the "New
Credit Agreement") which replaced the credit facilities previously made
available to the Company under a credit agreement entered into in September
1993 (as amended, the "Previous Credit Agreement") and increased, to $235.0
million, the amount that may be borrowed (subject to a borrowing base
limitation) under the revolving credit facility of the New Credit Agreement.
At October 25, 1996, the Company had $204.5 million outstanding under such
agreement, consisting of $149.2 million and $55.3 million in borrowings under
the revolving credit facility and term loan facility, respectively. Borrowing
availability under the New Credit Agreement at October 25, 1996, after taking
into account borrowing base restrictions and outstanding letters of credit, was
$59.5 million. The Company expects to utilize this additional borrowing
availability, to the extent necessary, to fund the completion of the integration
of PI with the Company's operations and to fund the Company's further expansion
efforts. The Company
10
<PAGE> 11
expects that, as a result of such financing and anticipated increased
borrowings, interest expense for future periods may continue to increase
compared to the same periods of the prior year.
Income taxes for the three months and nine months ended October 25,
1996 were $3.6 million (an effective tax rate of 37.0%) and $7.9 million (an
effective tax rate of 37.1%), respectively, compared to $3.0 million and $9.0
million (an effective tax rate of 35.7% and 37.1%, respectively), for the
corresponding periods of the prior year. The combined applicable federal and
state statutory tax rate is expected to approximate 37-38% during the fiscal
year ending January 25, 1997 ("fiscal 1997").
Net income for the three months and nine months ended October 25, 1996
was $6.1 million (2.8% of net sales) and $13.4 million (2.0% of net sales),
respectively, compared to a net income of $5.4 million (3.4% of net sales) and
$15.2 million (3.4% of net sales), respectively, for the corresponding periods
of the prior year. Such decrease in net income is primarily a result of the
factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. For the nine months ended October 25, 1996, operating
activities provided net cash of approximately $26.2 million, resulting
primarily from the Company's net earnings adjusted for the impact of non-cash
expenses. Investing activities utilized $11.2 million of cash, primarily
resulting from the Company's investment in business acquisitions, capital
expenditures and available for sale securities. Such investments were offset
by the proceeds from the sale of assets including the Company's interest in the
"Parts Plus" group of marks which had been acquired by the Company in the PI
Acquisition. See "Other Matters" below. Financing activities utilized $10.3
million of cash, principally resulting from the retirement of long-term debt.
For the nine months ended October 25, 1995, operating activities
utilized net cash of approximately $18.7 million resulting primarily from
increases in inventories, accounts receivable and other current assets in
connection with the expansion of the Company's ISW business. Such increases
were offset in part by the Company's net earnings and increases in accounts
payable. Investing activities utilized $22.1 million of cash, principally
consisting of the Company's investment in business acquisitions, capital
expenditures, and notes receivable. Financing activities provided $44.3
million of cash, principally resulting from net borrowings under the Company's
credit agreement to finance its ISW expansion and business acquisitions.
Working Capital. At October 25, 1996, the Company had $299.9 million
of working capital, including $12.6 million in cash and cash equivalents,
compared to $302.7 million of working capital at January 27, 1996, including
$7.9 million of cash and cash equivalents. During the nine months ended October
25, 1996, current assets and current liabilities increased by $1.7 million and
$4.5 million, respectively. Such increases are primarily attributable to
increases in inventories, resulting from business acquisitions and expansion of
its ISW business, and accounts payable. A significant portion of such increase
in accounts payable was attributable to the Company obtaining deferred payment
terms from its suppliers in connection with the PI Acquisition, which were
largely offset by credits for the return of PI inventory to suppliers and by the
payment of deferred ISW accounts payable. Such PI Acquisition-related deferred
payment terms will generally expire over a twelve to thirty-six month period.
Looking forward, the Company expects to continue adding ISWs and to continue
making strategic acquisitions from time to time. As a result, the Company
expects its working capital to increase in future periods.
Interest Rate Swap Agreements During the year ended January 27, 1996,
the Company entered into interest rate swap agreements to hedge interest costs
and risks associated with variable interest rates. Such agreements, which
cover a portion of the borrowings under the New Credit Agreement, effectively
convert variable-rate debt to fixed-rate debt with an effective per annum
interest rate of approximately 7.1%. The aggregate notional principal amount
of these agreements is $100.0 million, $75.0 million of which became effective
in June 1995 and matures in June 1997 and $25.0 million of which became
effective in January 1996 and matures in January 1998. The counterparties to
such agreements are major financial institutions and, therefore, credit losses
from counterparty nonperformance is not anticipated.
11
<PAGE> 12
Capital Expenditures and Acquisitions. Capital expenditures for the
nine months ended October 25, 1996, excluding new business acquisitions, were
approximately $7.7 million compared to $6.1 million for the corresponding
period of the prior year. The increase in capital expenditures was primarily a
result of capacity enhancements to certain distribution centers to facilitate
the consolidation of PI and Company facilities, continued management information
system enhancements, primarily the development of a new accounts receivable
system, and the addition of the PI facilities. The Company expects capital
expenditures to increase in the remainder of fiscal 1997 and in fiscal 1998
primarily as a result of additional management information system enhancements,
including development of a centralized accounting and reporting system for the
ISW business, with a particular focus on expense control and working capital
management.
In order to expand its business, the Company expects to continue to
make strategic acquisitions from time to time for cash and other consideration
and to continue adding new ISWs, in each case to the extent that its debt
service requirements, financing agreement covenants, financial performance and
funding availability permit. To meet the cash funding requirements for the
Company's continuing expansion efforts, the Company expects to draw on
internally generated funds, borrowings under the New Credit Agreement, proceeds
from the disposition of non-strategic assets and other sources of liquidity, to
the extent available, as discussed below.
Sources of Liquidity. Since the completion of the Company's initial
public offering and debt refinancing in 1993, the Company has pursued more
aggressive acquisition and ISW expansion programs, resulting in increased
funding requirements. The principal sources of liquidity for the Company's
business expansion and operating requirements in prior years have been
internally generated funds from the operation of its traditional businesses,
borrowings under the Previous Credit Agreement and the proceeds from issuance
of the Notes. The Company expects that the principal sources of liquidity for
its future operating requirements and business expansion will be cash flows
from the operation of its traditional businesses and borrowings under the New
Credit Agreement. In addition, the Company has negotiated deferred payment
terms with respect to a substantial portion of its accounts payable as of
October 25, 1996 and other one-time changeover and acquisition incentives (a
significant portion of which has already been recognized) with its major
suppliers in order to offset the costs of integrating PI and to improve the
Company's liquidity during such integration. While the Company expects that
such sources will provide sufficient working capital to operate its business,
finance the completion of such integration and its currently planned expansion
efforts and pay its accounts payable as such deferred payment terms expire,
there can be no assurance that such sources will prove to be sufficient or that
vendor incentives not yet recognized will be fully attained. Further, the
Company expects such sources will provide sufficient funds to meet its regularly
scheduled debt service obligations (which have been significantly increased as a
result of the PI Acquisition and related financing) prior to maturity of the
revolving credit facility under the New Credit Agreement. The Company currently
does not expect, however, to generate cash flow sufficient to fund the repayment
of borrowings due under such revolving credit facility upon its maturity on
December 31, 2000 and, accordingly, expects that it will seek to refinance such
amounts prior to such maturity. No assurance can be given that such refinancing
can be successfully accomplished.
GROWTH STRATEGY AND INTEGRATION OF PI
As indicated above, the Company plans to continue growing by adding
ISWs and making strategic acquisitions, in each case to the extent that its
debt service requirements, financing agreement covenants, financial performance
and availability of funding permit.
The Company increased the total number of ISW locations from 252 to
275 during the nine months ended October 25, 1996, and plans to add
approximately 9 new ISWs during the remainder of fiscal 1997. To date,
operating margins for the ISW division have been below those of the Company's
traditional businesses and, thus far, the ISW division has not contributed
significantly to the Company's operating income. The Company's operating
results have experienced and are expected to continue to experience earnings
and cash flow pressure due to the large number of less mature ISWs and the
growth of the ISW base, the costs of opening additional ISWs and the
expiration, generally after a period of six to fifteen months, of deferred
payment terms extended to the Company by vendors in connection with the opening
of new ISW locations. Looking forward, the Company remains convinced of the
viability of the ISW concept and is continuing efforts to refine and improve
the execution of this division's business strategy. Such efforts include
changes in the ISW management team and the development of new management
information systems. See
12
<PAGE> 13
"Capital Expenditures and Acquisitions", above.
During the nine months ended October 25, 1996, the Company completed
the closure of nine of PI's original distribution centers, and completed a
majority of the changeover activities associated with converting the PI stores
and the remaining five PI distribution centers to the Big A program. The costs
associated with this changeover and the overall process of integrating PI into
the Company were offset by the recognition of approximately $7.9 million of
supplier changeover incentives. The Company currently anticipates that it may
recognize additional changeover incentives during the remainder of this fiscal
year and the first six months of the Company's next fiscal year, although there
can be no assurance that such incentives will actually be recognized. Full
realization of the potential benefits of the PI Acquisition will be dependent
upon a variety of factors, including (i) maintaining significant reductions in
cost of goods sold resulting from purchasing economies extended to the Company
by suppliers; (ii) achieving significant reductions in selling, general and
administrative expenses through the consolidation, closure or more efficient
operation of certain operating and administrative facilities and functions; and
(iii) obtaining additional one-time changeover incentives from suppliers that
will be sufficient to offset the remaining costs and expenses that the Company
expects to incur in connection with the PI Acquisition and the completion of the
integration of PI into the Company. Furthermore, in connection with the PI
Acquisition, the Company realized a significant cash flow benefit resulting from
the deferral of a significant amount of accounts payable owed to suppliers.
Most of these deferrals will be required to be repaid to suppliers at various
dates through March 1999. The Company has made substantial progress in its
integration of PI's operations into the operations of the Company; however,
there can be no assurance as to the extent to which the Company will be able to
realize the potential benefits of the PI Acquisition or the timing of such
realization. While certain of these benefits have been realized to date, failure
to achieve a substantial portion of the remaining benefits within the time frame
expected by the Company could materially and adversely affect the Company's
future results of operations and financial position.
SEASONALITY; INFLATION
Historically, the Company's net sales have been higher during April
through September of each year than during the other months of the year. In
addition, the demand for automotive products is somewhat affected by weather
conditions and, consequently, the Company's results of operations from period
to period may be affected by such conditions. Temperature extremes tend to
enhance sales by causing a higher incidence of parts failure and increasing
sales of seasonal products, while milder weather tends to depress sales.
During the quarter ended October 25, 1996, the Company experienced higher than
expected returns of seasonal products as a result of unusually cool summer
weather.
The Company's management does not believe that its operations have
been materially affected by inflation. In general, the Company has been able
to pass on to its customers any increases in the cost of its inventory.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, entitled "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities" ("SFAS No. 125"), in
August 1996. The Company is required to adopt the accounting rules of SFAS No.
125 for certain transactions occurring after December 31, 1996. The adoption
of SFAS No. 125 is not expected to have a significant impact on the Company's
financial position or results of operations.
FORWARD LOOKING INFORMATION
The statements contained in this Report on Form 10-Q ("Quarterly
Report") which are not historical facts, including, but not limited to,
statements found under the captions "Results of Operations", "Liquidity and
Capital Resources" and "Growth Strategy and Integration of PI" above, are
forward-looking statements that involve a number of risks and uncertainties.
The actual results of the future events described in such forward-looking
statements in this Quarterly Report could differ materially from those
contemplated by such forward-looking statements. Among the factors that could
cause actual results to differ materially are the risks and uncertainties
discussed in the Quarterly Report and in the Company's Annual Report on Form
10-K for the year ended January 27, 1996, including without limitation, the
portions of such reports under the captions referenced above, and the
uncertainties set forth from time to time in the
13
<PAGE> 14
Company's other public reports and filings and public statements.
OTHER MATTERS
In February 1996, the Company sold its interest in the "Parts Plus"
group of marks, which had been acquired by the Company in the PI Acquisition,
to the Association of Automotive Aftermarket Distributors ("AAAD") for cash
consideration of $3.5 million. PI had previously licensed the same marks to
AAAD for a small yearly license fee.
On October 25, 1996, the Company completed the sale of seventeen
Company-owned stores and one ISW located in Mississippi and Florida to
associated jobbers for a gain of approximately $1.0 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
None.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. EXHIBITS
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
- ------- ---------------------- -------------------
<S> <C> <C>
10.5.38 Second Amendment, dated as of August 28, 1996, to the
Amended and Restated Credit Agreement dated as of
January 25, 1996, among A.P.S. Inc., the several lenders
from time to time parties thereto, and Chase Manhattan Bank
(formerly Chemical Bank), as agent.
10.20 Agreement of Sale By and Between The Parts Source, Inc.
and A.P.S., Inc., dated as of October 22, 1996.
10.21 Agreement of Sale By and Between Rankin Automotive Group,
Inc. and Parts, Inc., dated as of September 12, 1996.
11.1 Statement re Computation of Income Per Share
12.0 Statement re Computation of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
B. REPORTS ON FORM 8-K
None.
15
<PAGE> 16
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.
APS HOLDING CORPORATION
Date: December 6, 1996 By: /S/ Mark S. Hoffman
----------------------------------
Mark S. Hoffman
Director, President and Chief
Executive Officer
Date: December 6, 1996 By: /S/ John L. Hendrix
----------------------------------
John L. Hendrix
Vice President and Chief
Financial Officer
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------
<S> <C>
10.5.38 Second Amendment, dated as of August 28, 1996, to the
Amended and Restated Credit Agreement dated as of
January 25, 1996, among A.P.S. Inc., the several lenders
from time to time parties thereto, and Chase Manhattan Bank
(formerly Chemical Bank), as agent.
10.20 Agreement of Sale By and Between The Parts Source, Inc.
and A.P.S., Inc., dated as of October 22, 1996.
10.21 Agreement of Sale By and Between Rankin Automotive Group,
Inc. and Parts, Inc., dated as of September 12, 1996.
11.1 Statement re Computation of Income Per Share
12.0 Statement re Computation of Earnings to Fixed Charges
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.5.38
SECOND AMENDMENT, dated as of August 28, 1996 (this
"Amendment"), to the Amended and Restated Credit Agreement dated as of January
25, 1996 (as amended pursuant to the First Amendment thereto, dated as of April
23, 1996, and this Amendment and as the same may be further amended,
supplemented, waived or otherwise modified from time to time, the "Credit
Agreement"), among A.P.S., INC., a Delaware corporation (the "Borrower"), the
several banks and other financial institutions from time to time parties
thereto (collectively, the "Lenders"; individually a "Lender") and THE CHASE
MANHATTAN BANK (formerly known as Chemical Bank), a New York banking
corporation, as agent for the Lenders (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower, the Lenders and the Agent are parties
to the Credit Agreement;
WHEREAS, the Borrower has requested that the Lenders amend the
Credit Agreement in the manner provided for herein; and
WHEREAS, the Agent and the Lenders are willing to agree to the
requested amendments, but only upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premises contained
herein, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein,
terms which are defined in the Credit Agreement and used herein are so used as
so defined.
2. Amendment to Subsection 4.4. Subsection 4.4 of the
Credit Agreement is hereby amended by deleting the reference to subsection
8.6(i) in the seventh line of paragraph (c) thereof and inserting in lieu
thereof a reference to subsection 8.6(k).
3. Amendment to Subsection 8.3. Subsection 8.3 of the Credit
Agreement is hereby amended by (i) deleting the word "and" at the end of
paragraph (m) thereof, (ii) inserting the phrase ";and" in lieu of the period
at the end of paragraph (n) thereof and (iii) inserting a new paragraph (o) at
the end thereof which will read as follows:
"(o) Liens pursuant to or resulting from the A.P.S., Inc.
Executive 401(k) Deferral Plan or the A.P.S., Inc. Executive 401(k)
Deferral Plan Trust Agreement (such plan and trust agreement, collectively,
as amended, supplemented, waived or otherwise modified from time to time,
the "401(k) Plan Documents")."
<PAGE> 2
2
4. Amendment to Subsection 8.6. Subsection 8.6 of the Credit
Agreement is hereby amended by (i) deleting the word "and" at the end of
paragraph (i) thereof, (ii) redesignating the current paragraph (j) thereof
paragraph (k) and (iii) inserting a new paragraph (j) which will read as
follows:
"(j) any sale, transfer or other Disposition of any of its
property or assets pursuant to the 401(k) Plan Documents; and".
5. Amendment to Subsection 8.10. Subsection 8.10 of the
Credit Agreement is hereby amended by (i) deleting the word "and" at the end of
paragraph (j) thereof, (ii) inserting the phrase "; and " in lieu of the period
at the end of paragraph (k) thereof and (iii) inserting a new paragraph (l) at
the end thereof which will read as follows:
"(l) Investments pursuant to the 401(k) Plan Documents."
6. Representations and Warranties. On and as of the date
hereof and after giving effect to this Amendment, the Borrower hereby confirms,
reaffirms and restates the representations and warranties set forth in Section
5 of the Credit Agreement mutatis mutandis, except to the extent that such
representations and warranties expressly relate to a specific earlier date in
which case the Borrower hereby confirms, reaffirms and restates such
representations and warranties as of such earlier date, provided that the
references to the Credit Agreement in such representations and warranties shall
be deemed to refer to the Credit Agreement as amended prior to the date hereof
and pursuant to this Amendment.
7. Effectiveness. This Amendment shall become effective as
of the date hereof upon receipt by the Agent of counterparts of this Amendment
duly executed and delivered by the Borrower and the Required Lenders.
8. Continuing Effect; No Other Amendments. Except as
expressly amended hereby, all of the terms and provisions of the Credit
Agreement are and shall remain in full force and effect. The amendments
provided for herein are limited to the specific subsections of the Credit
Agreement specified herein and shall not constitute an amendment of, or an
indication of the Agent's or the Lenders' willingness to amend, any other
provisions of the Credit Agreement or the same subsections for any other date
or time period (whether or not such other provisions or compliance with such
subsections for another date or time period are affected by the circumstances
addressed in this Amendment).
9. Expenses. The Borrower agrees to pay and reimburse the
Agent for all its reasonable costs and out-of-pocket expenses incurred in
connection with the preparation and delivery of this
<PAGE> 3
3
Amendment, including, without limitation, the reasonable fees and disbursements
of counsel to the Agent.
10. Counterparts. This Amendment may be executed by one
or more of the parties to this Amendment on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Amendment signed by all the parties shall be delivered to the Borrower and the
Agent.
11. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered by their respective duly authorized
officers as of the date first above written.
A.P.S., INC.
By: /s/ E. EUGENE LAUVER
-----------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK (formerly
known as Chemical Bank), as
Agent and as a Lender
By: /s/ JULIE S. LONG
-----------------------------------
Title: Vice President
THE BANK OF NEW YORK
By: /s/ ALAN F. LYSTER, JR.
-----------------------------------
Title: Vice President
BANK ONE, COLUMBUS, N.A.
By: /s/ DOUGLAS H. KLAMFOTH
-----------------------------------
Title: Vice President
<PAGE> 4
4
BANQUE PARIBAS
By: /s/ PIERRE-JEAN de FILIPPIS
------------------------------------
Title: General Manager
By: /s/ KENNETH E. MOORE, JR.
------------------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By: /s/ THOMAS BARNETT
------------------------------------
Title: Vice President
FIRST INTERSTATE BANK OF TEXAS,
N.A.
BY: /s/ VALERIE B. CARLSON
------------------------------------
Title: Vice President
FLEET BANK OF MASSACHUSETTS, N.A.
BY: /s/ KEVIN P. CRONIN
------------------------------------
Title: Senior Vice President
THE FUJI BANK, LIMITED, HOUSTON
AGENCY
BY: /s/ DAVID L. KELLEY
------------------------------------
Title: Vice President
NATIONAL BANK OF CANADA
BY: /s/ LARRY SEARS
------------------------------------
Title: Group Vice President
By: /s/ BILL HANDLEY
------------------------------------
Title: Vice President
<PAGE> 5
5
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ F. SCOTT SINGHOFF
------------------------------------
Title: Senior Vice President
NBD BANK
By: /s/ WILLIAM J. McCAFFREY
------------------------------------
Title:
SOCIETE GENERALE
BY: /s/ RICHARD A. GOULD
------------------------------------
Title:
WELLS FARGO BANK, N.A.
BY: /s/ MARY JO HOCH
------------------------------------
Title:
FIRST AMERICAN NATIONAL BANK
BY: /s/ COREY NAPIER
------------------------------------
Title:
AMSOUTH BANK OF ALABAMA
By: /s/ JOHN HOOKER
------------------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
BY: /s/ SHINICHI MAKAKUBO
------------------------------------
Title:
<PAGE> 6
Each of the undersigned hereby consents to the foregoing Amendment and
hereby confirms, reaffirms and restates that its obligations under or in
respect of the Credit Agreement and the documents related thereto to which it
is a party are and shall remain in full force and effect after giving effect to
the foregoing Amendment.
APS HOLDING CORPORATION
By: /s/ E. EUGENE LAUVER
----------------------------------
Title: Vice President
BIG A AUTO PARTS, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
AUTOPARTS FINANCE COMPANY, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
APS SUPPLY, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
AMERICAN PARTS SYSTEM, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
A.P.S. MANAGEMENT SERVICES, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
<PAGE> 7
2
PARTS, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
PRESATT, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
INSTALLERS' SERVICE WAREHOUSE, INC.
By: /s/ E. EUGENE LAUVER
---------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.20
================================================================================
AGREEMENT OF SALE
BY AND BETWEEN
THE PARTS SOURCE, INC. ("PURCHASER")
AND
A.P.S., INC. ("SELLER")
DATED AS OF: OCTOBER 22, 1996
================================================================================
<PAGE> 2
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement") is made and entered into as of
the 22nd day of October, 1996, by and between A.P.S., INC., a Delaware
corporation ("Seller"), which term shall include Seller's successors and
assigns wherever the context hereof so requires or admits, and THE PARTS
SOURCE, INC., a Florida corporation ("Purchaser"), which term shall include its
successors and assigns wherever the context hereof so requires or admits.
WHEREAS, Seller, through one or more subsidiaries, owns and operates a
business for the sale of automotive parts, accessories and supplies at the
locations set forth on EXHIBIT "A", (the "Business Locations", and Seller
desires to sell substantially all of the assets associated with the operation
of the businesses at the Business Locations upon the terms and conditions set
forth herein; and
WHEREAS, Purchaser desires to purchase such assets from Seller upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, Seller and Purchaser hereby agree as
follows:
1. PURCHASE OF ASSETS
A. Subject to the terms and conditions of this Agreement, Seller
shall sell and deliver to Purchaser and Purchaser shall purchase and take
possession at the Business Locations, upon completion of the physical inventory
described in Section 3.A. hereof, to be completed on the Closing Date (as
hereinafter defined), free and clear of all liens, security interests, pledges
or encumbrances, all of the automotive inventory (including cores, warranty
merchandise , inventory in transit and finished goods) of Seller located at the
Business Locations, physically counted in accordance with the inventory
procedures described in Section 3.A. hereof (the "Inventory"), a complete list
of which shall be annexed to this Agreement as EXHIBIT "B" as promptly as
practicable but not later than the time of Closing (as hereinafter defined).
Excluded from the purchase provisions of this Agreement is any item of
Inventory identified by the manufacturer thereof as being obsolete or if any
such item no longer appears in the applicable manufacturer's then current
published price sheet, and those items of Inventory whose packaging is not in
resalable condition by reason of water or other damage. Inventory not
purchased by Purchaser shall remain the property of Seller and shall be
promptly returned to Seller by Purchaser.
B. Subject to the terms and conditions of this Agreement, Seller
shall sell and deliver to Purchaser and Purchaser shall purchase and take
possession at the Business Locations as of Seller's close of business on the
Closing Date, free and clear of all liens, security interests, pledges or
encumbrances, all of the machinery, equipment, furniture, fixtures, signs,
vehicles and leasehold improvements located at the Business Locations on the
Closing Date, which are owned by Seller, a principal list of which is attached
as EXHIBIT "C" (excluding, however, certain computer
<PAGE> 3
equipment set forth as excluded) which list shall be supplemented by Seller, as
of the Closing Date, no later than the True-Up Date and the Purchase Price
shall be adjusted accordingly.
C. Subject to the terms and conditions of this Agreement, Seller
shall sell and convey to Purchaser and Purchaser shall purchase and receive
from Seller, all of Seller's right, title and interest in and to the prepaid
expenses and other assets detailed on EXHIBIT "D".
D. Subject to the terms and conditions of this Agreement, Seller
shall convey to Purchaser and Purchaser shall receive from Seller, all of
Seller's goodwill in the operation of the Business Locations as going concerns,
excluding, however, the trademarks or trade names used by Seller at the
Business Locations.
E. The assets described in Sections 1.A., 1.B., 1.C. and 1.D. hereof
are herein both individually and collectively referred to as "Assets ".
F. Except for the warranty of title set forth in Section 11.A.
hereof, the Assets are being sold "AS IS," "WHERE IS" and "WITH ALL FAULTS" and
Seller hereby expressly disclaims any and all other warranties both express and
implied.
2. PURCHASE PRICE
A. The purchase price for the Assets described in Section 1.A.
hereof is a sum of money equal to the aggregate value of the Inventory priced
according to Seller's "Net 15 Pricing Program". All Inventory for which there
is no "Net 15 Pricing Program" price sheet shall be marked up at the same
percentage rate from Seller's acquisition cost as Inventory that appears on a
"Net 15 Pricing Program" price sheet.
B. The purchase price for the Assets described in Section 1.B.
hereof shall be a sum of money equal to the aggregate of their net book values
as set forth on Seller's balance sheet for the Business Locations dated as of
the Closing Date.
C. The purchase price for the prepaid expenses, leasehold
improvements and other Assets detailed on Exhibit "D" shall be the aggregate of
their respective net book values as set forth on Seller's balance sheet for the
Business Locations dated as of the Closing Date.
D. The purchase price for the Assets described in Section 1.D.
hereof is the sum of One Million Thirty-Six Thousand and No/100 Dollars
($1,036,000.00).
E. The sum of money due Seller by Purchaser for the sale and
purchase respectively of the Assets, as adjusted either upward or downward
according to the provisions of this Agreement, is herein referred to as the
"Purchase Price" and shall be paid in cash by wire transfer or other
immediately available funds acceptable to Seller.
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3. PHYSICAL INVENTORY
A. A physical accounting of the Inventory shall be taken commencing
as of Seller's close of business on the Closing Date. Such physical inventory
shall be taken cooperatively by representatives of Seller and Purchaser and a
written itemized listing setting forth specifically all such items physically
counted shall be prepared by Seller, which written inventory shall be priced
and extended using the valuation method described in Section 2.A. hereof.
Employees or independent contractors of Seller participating in the physical
inventory shall be compensated solely by Seller, and employees or independent
contractors of Purchaser participating in the physical inventory shall be
compensated solely by Purchaser.
B. Purchaser shall, on the Closing Date, deliver Seller immediately
available United States funds in an amount equal to one hundred percent (100%)
of the value of the Assets described in Sections 1.B., 1.C. and 1.D. hereof and
eighty percent (80%) of the value of the Inventory shown as being present at
the Business Locations on the financial books and records of Seller as of
Seller's then most recently completed FISCAL month.
4. CLOSING
The time of closing of this Agreement shall be at 12:00 noon local time
on October 25, 1996, at the offices of Seller, 15710 John F. Kennedy Boulevard,
Suite 700, Houston, Texas 77032, or at such other time and place or places as
the parties may agree ("Closing" or "Closing Date").
5. TRUE-UP
A. It is understood between Seller and Purchaser that the
calculation of the Purchase Price cannot be completed by the time of Closing
and as such the determination of the Purchase Price shall be ascertained on or
before seven (7) calendar days immediately following the Closing Date ("True-Up
Date"). On the True-Up Date, Purchaser shall deliver Seller good funds in an
amount necessary to have, as of the True-Up Date, delivered Seller the Purchase
Price (except as contemplated by Section 5.B. below), or in the unlikely event
the Purchase Price is less than the amount theretofore delivered Seller, the
amount of any excess shall be refunded to Purchaser by Seller's delivery of
good funds in the appropriate amount. In the event Seller and Purchaser cannot
agree upon the Purchase Price, any dispute shall be submitted to arbitration
according to the provisions of Section 5.B.
B. If, by the True-Up Date, Seller and Purchaser are unable to
agree to a purchase price for the Inventory, Purchaser shall have delivered to
Seller at Closing the sum of money set forth in Section 3.B. and on the True-Up
Date such sum of money as is mutually agreed upon as then being owed and, with
respect to all disputed items relating to the Inventory purchase price, submit,
within ten (10) days following True-Up, for review and resolution, such
disputed items along with work papers, price sheets and other applicable
documents and materials to a mutually acceptable "Big 6" accounting firm or, if
such firm is unable or unwilling to act, to any other accounting firm selected
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<PAGE> 5
as hereinafter provided. The charges of such firm (or any other firm selected
as hereinafter provided) with respect to the services performed by it pursuant
to this Section 5.B shall be apportioned by such firm as it may determine on
the basis of each party bearing the expenses of that portion of the review that
relates to disputed items that are resolved not in favor of such party. If the
above firm is not willing or able to act as provided in this Section 5.B., then
for the purposes of resolving disputes under this Section 5.B. only, a firm of
independent Certified Public Accountants shall be selected by the then Chair-
person of the Florida Association of Certified Public Accountants, or if such
Chair-person is not willing or able to act, by the first in the order named of
the following then officers of the Florida Association of Certified Public
Accountants who is willing and able to act: President, Vice President (in order
of seniority if more than one), Treasurer or Secretary. The decision of the
arbitrating firm or individual as called for in this Section 5.B. shall be
conclusive and binding on Seller and Purchaser for the purposes of determining
the purchase price for the disputed items of Inventory set forth in Exhibit
"B". Purchaser and Seller shall each represent to the other that, to the best
of each such party's knowledge, the public accounting firm that will be
recommended by each has not performed services that could be considered a
conflict of interest to any arbitration work described in this Agreement. The
use of arbitration in this Agreement is limited solely to the purposes
specifically set forth in this Section 5.B.
6. TAXES
A. Purchaser hereby agrees to be solely responsible for and pay when
due any sales or other transfer tax or impositions and, except as otherwise set
forth in the immediately following sentence, any other tax or impositions that
may be applicable to the transfer of the Assets pursuant to this Agreement.
All personal property taxes shall be equitably prorated between Purchaser and
Seller as of the Closing Date and a corresponding adjustment to the Purchase
Price shall be made at Closing.
7. ASSUMPTION OF CERTAIN OBLIGATIONS; REIMBURSEMENT OF CERTAIN EXPENSES
A. Purchaser hereby specifically assumes all of the following
obligations of Seller with respect to the Business Locations:
(i) All operating and financing leases for vehicles,
telephones, photocopiers, fax machines, and all obligations with
respect to advertising arrangements (including yellow pages
advertising), alarm systems and the like (but excluding computer
systems and software licenses), a list of all such material
leases and obligations is set forth in EXHIBIT "E-1" hereto.
(ii) All service and maintenance contracts such as utilities,
trash pick up, alarm monitoring, computer and other equipment
maintenance for such time as Purchaser shall use Seller's
computer systems and software and the like, a list of all such
material service and maintenance contracts is set forth in
EXHIBIT "E-2" hereto.
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<PAGE> 6
(iii) All returns of merchandise to the Business Locations
following the Closing Date for warranty reasons.
B. To the extent any operating or financing leases are not
assignable, in whole or in part, Seller will make available to Purchaser the
use of the leased property for a payment to Seller in an amount equivalent to
what the Business Locations (including home office) are being charged therefor.
C. The Purchase Price will be increased by one-half (1/2) of the
cost incurred by Seller in the audit of the business conducted by Seller at the
Business Locations prepared at the request of Purchaser for inclusion in
Purchaser's securities filings.
8. CONDUCT OF BUSINESS BY PURCHASER AND SELLER
The business at the Business Locations shall be conducted by the Seller
between the date of execution of this Agreement and the Closing Date according
to and in conformity with all material laws, rules and regulations of all
governmental authority.
9. ACCESS TO RECORDS
Between the date of this Agreement's execution and the Closing Date,
Seller shall grant Purchaser and its authorized representatives reasonable
access during normal business hours to the books, records, contracts and
documents of Seller relating to Seller's operation of the Business Locations.
10. RISK OF LOSS
Provided the transactions contemplated by this Agreement close,
Purchaser assumes all risk of loss, destruction or damage to the Assets
purchased hereunder due to fire or other casualty whatsoever effective as of
12:01 a.m. on the Closing Date. Seller assumes all risk of loss, destruction
or damage to the Assets due to fire or other casualty whatsoever until 12:01
a.m. on the Closing Date. In the event of destruction, damage or partial loss
of or to any of the Assets prior to the Closing Date, such Assets shall be
excluded from the purchase provisions of this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties:
A. Excluding only those Assets under lease, Seller has good title to
each, every and all of the Assets.
B. The Assets shall be transferred to Purchaser free and clear of
any and all liens, charges, encumbrances, pledges, security interests or rights
of third parties except with respect to
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<PAGE> 7
current ad valorem personal property taxes.
C. Seller warrants and covenants that the execution and delivery of
this Agreement, and the consummation of the transactions herein contemplated
does not conflict with or constitute a default under any law or any order,
writ, injunction or decree of any court, governmental agency, bureau or
arbitration tribunal or of any contract, agreement or instrument by which
Seller is bound.
D. Seller is not a party to, subject to or bound by any judgment or
order of any court, agency or other governmental body that could or may prevent
the execution or consummation of the transactions contemplated in this
Agreement. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated herein will violate or result in
a breach of or constitute a default under any judgment, order or decree of any
court or governmental agency to which Seller is subject.
E. There are no actions, suits, arbitrations or other legal or
administrative proceedings pending or, to the knowledge of Seller, threatened
against Seller that relate to the Assets, that could materially and adversely
affect Seller's performance of this Agreement and Seller does not know or have
reason to be aware of any basis for the same.
F. Seller has not made any written or oral agreement to pay any
individual or entity any brokerage commission or finder's fee in connection
with the transactions contemplated by this Agreement.
G. The execution, delivery and performance of this Agreement (and
all other agreements delivered pursuant to this Agreement) and the consummation
of the transactions contemplated hereby (thereby) by Seller have been duly and
validly authorized by all requisite corporate actions and proceedings on the
part of Seller including, without limitation, actions and proceedings of
Seller's board of directors. All documents required by this Agreement (and all
other agreements delivered pursuant to this Agreement) to be executed and
delivered by Seller to Purchaser constitute legally valid and binding
obligations of Seller enforceable according to their terms, except as such
obligations may be affected by laws regarding creditors' rights generally or
the application of general principles of equity.
H. Seller is a corporation duly organized, validly existing and in
good standing under and by virtue of the laws of the State of Delaware and has
all requisite power and authority to operate a business at the Business
Locations; and the execution, delivery and performance of this Agreement by
Seller will not result in or constitute a breach of any term, provision of, or
default under, Seller's Certificate of Incorporation or by-laws, or any other
agreement or understanding to which Seller is a party or by which it is bound.
12. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties:
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<PAGE> 8
A. Purchaser is a corporation duly organized, validly existing and
in good standing under and by virtue of the laws of the State of Florida, is
duly qualified to conduct business within the state of Florida, and has full
corporate power and authority to enter into this Agreement (and all other
agreements delivered pursuant to this Agreement) and to carry out the
transactions contemplated hereby (thereby) and the execution, delivery and
performance of this Agreement (and all other agreements delivered pursuant to
this Agreement) by Purchaser will not result in or constitute a breach of any
term or provision of, or default under, Purchaser's Certificate of
Incorporation or bylaws of Purchaser or any other agreement or understanding to
which Purchaser is a party or by which it is bound.
B. The execution and delivery of this Agreement (and all other
agreements delivered pursuant to this Agreement) and the consummation of the
transactions contemplated hereby (thereby) in accordance with the terms of this
Agreement (and all other agreements delivered pursuant to this Agreement) do
not conflict with or constitute a default under any law or any order, writ,
injunction or decree of any court, governmental agency, bureau or arbitration
tribunal or of any contract, agreement or instrument by which Purchaser is
bound.
C. The execution, delivery and performance of this Agreement (and
all other agreements delivered pursuant to this Agreement) and the transactions
contemplated herein (therein) by Purchaser have been duly and validly
authorized by all requisite corporate actions and proceedings including,
without limitation, actions and proceedings of Purchaser's board of directors
and, when necessary, its stockholders. This Agreement and all documents to be
executed and delivered by Purchaser to Seller pursuant to the terms of this
Agreement, constitute legally valid and binding obligations of Purchaser
enforceable according to their terms, except as such obligations may be
affected by laws affecting creditors' rights generally or the application of
general principles of equity.
D. Purchaser has not made any written or oral agreement to pay any
individual or entity any brokerage commission or finder's fee in connection
with the transactions contemplated by this Agreement.
E. Purchaser is not a party to, subject to or bound by any judgment
or order of any court, agency or other governmental body that could or may
prevent the execution or consummation of this Agreement (and all other
agreements delivered pursuant to this Agreement). Neither the execution and
delivery of this Agreement (and all other agreements delivered pursuant to this
Agreement), nor the consummation of the transactions contemplated herein
(therein) will violate or result in a breach of or constitute a default under
any judgment, order or decree of any court or governmental agency to which
Purchaser is subject.
F. There are no actions, suits, arbitrations or other legal or
administrative proceedings pending or, to the knowledge of Purchaser,
threatened against Purchaser that could materially and adversely affect
Purchaser's performance of this Agreement and Purchaser does not know or have
reason to be aware of any basis for the same.
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<PAGE> 9
G. Purchaser has been provided all information, financial and other,
necessary for Purchaser to make a decision to enter into and perform, pursuant
to the terms of this Agreement (and all other agreements delivered pursuant to
this Agreement), and no representations have been made to Purchaser by Seller
or anyone else as to what the level of performance of Purchaser's business
shall be at the Business Locations.
13. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The performance of obligations of Seller under this Agreement are
subject to each, every and all of the following conditions:
A. Purchaser shall have performed and complied with all agreements
and conditions required by this Agreement to be performed and complied with by
it;
B. The representations and warranties of Purchaser set forth in
Section 12 hereof are, in all material respects, true and correct as of the
Closing Date;
C. No claim, action, suit, proceeding or investigation shall, to the
knowledge of Purchaser or Seller, be pending or threatened against Purchaser or
Seller which, if adversely determined, would prevent, hinder or invalidate the
consummation of the transactions contemplated by this Agreement, deprive Seller
of any right to be obtained hereunder, or result in the payment of damages by
Seller as a result of such transactions; and
D. Purchaser shall have delivered all of the documents, sums of
money, opinions and performed all other acts called for by the provisions of
this Agreement.
Purchaser's failure to meet any or all of the aforesaid conditions
precedent shall relieve Seller from any and all obligations of Seller under
this Agreement.
14. CONDITIONS PRECEDENT TO PURCHASERS PERFORMANCE
The performance of obligations of Purchaser under this Agreement are
subject to each, every and all of the following conditions:
A. Seller shall have performed and complied with all material
agreements and conditions required by this Agreement to be performed and
complied with by it;
B. The representations and warranties of Seller set forth in
Section 11 hereof are, in all material respects, true and correct as of the
Closing Date;
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<PAGE> 10
C. No claim, action, suit, proceeding or investigation shall, to the
knowledge of Purchaser or Seller, be pending or threatened against Purchaser or
Seller which, if adversely determined, would prevent, hinder or invalidate the
consummation of the transactions contemplated by this Agreement, deprive
Purchaser of any right to be obtained hereunder, or result in the payment of
damages by Purchaser as a result of such transactions; and
D. Seller shall have delivered all of the documents and performed
all other acts called for by the provisions of this Agreement.
Seller's failure to meet any or all of the aforesaid conditions
precedent shall relieve Purchaser from any and all obligations of Purchaser
under this Agreement.
15. SELLER'S DELIVERY AT CLOSING
At the time of the closing, Seller shall deliver or have delivered to
Purchaser the following:
A. A bill of sale in the form of EXHIBIT "F", duly executed by
Seller;
B. A duly executed certificate of the duly authorized Corporate
Secretary of Seller evidencing that the transactions contemplated by this
Agreement are unconditionally authorized by all requisite authority of Seller's
board of directors;
C. Real property lease assignments and/or subleases in the forms of
EXHIBIT "G-1" thru EXHIBIT "G-6";
D. An opinion of counsel for Seller, addressed to Purchaser, in the
form of EXHIBIT "H-1";
E. An Investment Agreement and Registration Rights Agreement in the
form of EXHIBITS "I-1 and "I-2"; and
F. Such other documents as may be reasonably necessary to transfer
the Assets or to grant Purchaser any of the rights intending to be given
Purchaser by the terms of this Agreement or any other agreement delivered
pursuant hereto (thereto).
16. PURCHASER'S DELIVERY AT CLOSING
At the time of closing, Purchaser shall perform or have performed the
following:
A. Deliver or have delivered to Seller U.S. funds in the form and in
the amount required by this Agreement;
B. Deliver to Seller a duly executed certificate of the Corporate
Secretary of Purchaser
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<PAGE> 11
evidencing that the transactions contemplated by this Agreement are
unconditionally authorized by all requisite authority of Purchaser's board of
directors and shareholders;
C. Real property lease assignments and/or subleases in the forms of
Exhibit "G-1" thru Exhibit "G-6";
D. An opinion of counsel acceptable to Seller, addressed to Seller,
in the form of EXHIBIT "H-2";
E. An Investment Agreement and Registration Rights Agreement in the
forms of Exhibits "I-1" and "I-2"; and
F. Such other documents as may be called for by the terms of this
Agreement or any other agreement delivered pursuant thereto.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of each of the parties hereto shall
survive Closing.
18. SELLER'S INDEMNIFICATION, HOLD HARMLESS
Seller hereby indemnifies and holds Purchaser harmless from and against
any and all claims, judgments, actions, costs, liabilities, damages, debts,
dues, sums of money, accounts, controversies, reckonings, promises, agreements,
executions at law or in equity (whether direct or consequential) and expenses
whatsoever (including, without limitation, reasonable attorney's fees) that may
be based upon, arise out of or result from any actual or claimed breach of any
representation, warranty, covenant or undertaking of Seller made or pledged in
this Agreement.
19. PURCHASER'S INDEMNIFICATION, HOLD HARMLESS
Purchaser hereby indemnifies and holds Seller harmless from and against
any and all claims, judgments, actions, costs, liabilities, damages, debts,
dues, sums of money, accounts, controversies, reckonings, promises, agreements,
executions at law or in equity (whether direct or consequential) or expenses
whatsoever (including, without limitation, reasonable attorney's fees) that may
be based upon, arise out of or result from any actual or claimed breach of any
representation, warranty, covenant or undertaking of Purchaser (including
without limitation the assumption of those liabilities set forth in Section 7)
made or pledged in this Agreement.
20. EMPLOYMENT MATTERS
Purchaser shall have no obligation in respect of, and assumes no
responsibility for, accrued employment benefits of any kind claimed to belong
or belonging to Seller's employees except that Purchaser shall honor the
vacation earned by those employees of Seller (including any direct or
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<PAGE> 12
indirect subsidiaries of Seller) employed by Purchaser or an affiliate of
Purchaser while in Seller's employ and Seller shall reduce the Purchase Price
by the value of such accrued vacation obligation.
21. CONDITION OF BUSINESS LOCATIONS
A. Between the date of execution of this Agreement and the Closing
Date, the Purchaser, its employees, agents and contractors may enter upon the
Business Locations at all reasonable times for the purpose of inspecting the
condition of such Business Locations. The Purchaser shall submit to the Seller
a detailed report identifying repairs and replacements (including the estimated
cost for completing such repairs or replacements) pertaining to the Business
Locations, whether interior or exterior, ordinary or extraordinary or
structural or non-structural, which repairs and replacements are necessary in
order for the Business Locations to be in the condition that the respective
landlords would reasonably require pursuant to the terms of the Business
Locations' leases. The Seller shall make all of the necessary repairs as
herein required.
B. Between the date of execution of this Agreement and the Closing
Date, the Seller may make any alterations, additions or improvements to the
Business Locations. The Purchaser shall be under no obligation to reimburse
Seller for any such alterations, additions or improvements to the Business
Locations unless Purchaser shall have given its prior written consent.
22. COOPERATION OF SELLER AND PURCHASER SUBSEQUENT TO CLOSING
Subsequent to the Closing Date, each of Purchaser and Seller, at the
request of the other, shall execute, deliver and acknowledge all such further
instruments and documents and do and perform all such other acts and deeds as
may be reasonably required to vest more effectively in each such party the
rights intended to be conferred upon such party pursuant to this Agreement.
23. WAIVER OF BULK SALES REQUIREMENT
Seller and Purchaser hereby agree to waive the bulk transfer provisions
of the Uniform Commercial Code as adopted by the State of Florida, if any,
subject only to the indemnification provisions of Section 18.
24. NOTICES
All notices, requests and other communications hereunder shall be in
writing and shall be deemed to have been given, if sent by certified mail,
return receipt requested, postage prepaid or by CONFIRMED fax, as follows:
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If to Seller, to: A.P.S., Inc.
World Houston Plaza
15710 John F. Kennedy Boulevard, Suite 700
Houston, Texas 77032
Attention: Vice President & General Counsel
Fax number: (713) 507-1367
If to Purchaser, to: The Parts Source, Inc.
1751 South Missouri
Clearwater, Florida 34616
Attn: President
Fax number: (813) 559-8878
with a copy to: Schifino & Fleischer, P.A.
201 North Franklin Street
One Tampa City Center, Suite 2700
Tampa, Florida 33206
Attention: William Schifino, Esquire
Fax number: (813) 223-3070
or to such other address or addresses or fax numbers to which such parties
shall have notified the other in writing.
25. COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. MODIFICATIONS
This Agreement constitutes the entire understanding between the parties
hereto with respect to the subject matter hereof and may not be amended or
modified in any respect except by an instrument in writing executed by each of
the parties hereto.
27. EXPENSES
Each party to this Agreement shall pay its own expenses (including,
without limitation, fees and expenses of auditors and legal counsel) incident
to the transactions contemplated by this Agreement.
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28. ENTIRE AGREEMENT
This instrument, together with any schedules or exhibits attached hereto
and made a part hereof, contains the entire agreement between the parties
hereto with respect to the sale by Seller and the purchase by Purchaser of the
Assets described herein and supersedes any and all prior agreements made by the
parties with respect thereto.
29. INVALIDITY
The invalidity of any provision of this Agreement shall not impair the
validity of any other provision. If any provision of this Agreement is
determined by a court of competent jurisdiction to be unenforceable, such
provision shall be deemed severable and this Agreement may be enforced with
such provision severed or as modified by such court.
30. EFFECT OF EXECUTION
Until executed by all parties, this is a draft and is neither an
agreement between the parties nor an embodiment of any prior oral agreement.
When and if this document is fully executed, it shall become the agreement of
the parties hereto.
31. SECTION AND OTHER HEADINGS
The section and other headings contained in this Agreement are for
reference purposes and shall not in any way affect the meaning or
interpretation of this Agreement. Reference to "Sections," "Exhibits" and
"Schedules" refer to Sections of this Agreement and Exhibits and Schedules
attached or referred to in this Agreement. Terms used in the Exhibits and
Schedules that ARE defined in this Agreement shall have the meaning given them
in this Agreement.
32. INTERPRETATION
This Agreement is to be interpreted according to the laws of the State
of Florida.
33. GOVERNING LAW; COURTS
This Agreement shall be construed and enforced in accordance with the
laws of the State of Florida without regard to principles of conflicts of laws.
The parties agree that in any dispute between them relating to this Agreement,
exclusive jurisdiction shall be in the trial courts located within Orange
County, Florida, any objections as to jurisdiction or venue in such courts
being expressly waived.
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed as of the day and year first above written.
ATTEST: SELLER:
A.P.S., INC.
/s/ RICHARD S. GARFINKEL By: /s/ E. EUGENE LAUVER
- ---------------------------- -------------------------
Assistant Secretary Vice President
PURCHASER:
ATTEST:
THE PARTS SOURCE, INC.
/s/ ROBERT A. COX JR. By: /s/ THOMAS D. COX
- ---------------------------- -------------------------
Secretary President
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<PAGE> 1
EXHIBIT 10.21
================================================================================
AGREEMENT OF SALE
BY AND BETWEEN
RANKIN AUTOMOTIVE GROUP, INC. ("PURCHASER")
AND
PARTS, INC. ("SELLER")
DATED: SEPTEMBER 12, 1996
================================================================================
<PAGE> 2
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (this "Agreement") is made and entered into as of
the 12th day of September, 1996, by and between PARTS, INC., a Tennessee
corporation ("Seller"), which term shall include Seller's successors and
assigns wherever the context hereof so requires or admits, and RANKIN
AUTOMOTIVE GROUP, INC., a Louisiana corporation ("Purchaser"), which term shall
include its successors and assigns wherever the context hereof so requires or
admits.
WHEREAS, Seller owns and operates a business for the sale of automotive
parts, accessories and supplies at the locations set forth on EXHIBITS "A-1"
and "A-2", (the locations set forth in Exhibit "A- 1" are individually and
collectively the "Business Locations" and, should Purchaser exercise the option
as hereinafter described, those locations set forth in Exhibit "A-2" shall also
be, both individually and collectively, "Business Locations "), and Seller
desires to sell substantially all of the assets associated with the operation
of the businesses at the Business Locations upon the terms and conditions set
forth herein; and
WHEREAS, Purchaser desires to purchase such assets from Seller upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, Seller and Purchaser hereby agree as
follows:
1. PURCHASE OF ASSETS
A. Subject to the terms and conditions of this Agreement, Seller
shall deliver to Purchaser and Purchaser shall take possession at the Business
Locations, upon completion of the physical inventory described in Section 3.A.
hereof to be completed on the Closing Date (as hereinafter defined), free and
clear of all liens, security interests, pledges or encumbrances, all of the
automotive inventory (including cores, warranty merchandise and finished goods)
of Seller located at the Business Locations physically counted in accordance
with the inventory procedures described in Section 3.A. ("Inventory") hereof, a
complete list of which shall be annexed to this Agreement as EXHIBIT "B" as
promptly as practicable but not later than the time of Closing (as hereinafter
defined). Excluded from the purchase provisions of this Agreement is any item
of Inventory identified by the manufacturer thereof as being obsolete or if any
such item no longer appears in the applicable manufacturer's then current
published price sheet and those items of Inventory whose packaging is not in
resalable condition by reason of water or other damage. Inventory not
purchased by Purchaser shall remain the property of Seller and shall be
promptly returned to Seller by Purchaser.
B. Subject to the terms and conditions of this Agreement, Seller
shall sell and deliver to Purchaser and Purchaser shall purchase and take
possession at the Business Locations as of Seller's close of business on the
Closing Date, free and clear of all liens, security interests, pledges or
encumbrances, all of the machinery, equipment, furniture, fixtures, signs,
vehicles and leasehold
<PAGE> 3
improvements located at the Business Locations on the Closing Date, which are
owned by Seller, a principal list of which is attached as EXHIBIT "C", which
list shall be supplemented by Seller, as of the Closing Date no later than the
True-Up Date and the Purchase Price shall be adjusted accordingly.
C. Subject to the terms and conditions of this Agreement, Seller
shall convey to Purchaser and Purchaser shall receive from Seller, all of
Seller's right, title and interest in and to the prepaid expenses and other
assets detailed on EXHIBIT "D".
D. The assets described in Sections 1.A., 1.B. and 1.C. hereof are
herein both individually and collectively referred to as "Assets ".
E. Except for the warranty of title set forth in Section 11.A.
hereof, the Assets are being sold "AS IS," "WHERE IS" and "WITH ALL FAULTS" and
Seller hereby expressly disclaims any and all other warranties both express and
implied.
F. Those locations set forth in Exhibit "A-1" shall for all
purposes of this Agreement be treated as Business Locations and those locations
set forth in Exhibit "A-2" hereto, provided Purchaser notifies Seller in
writing prior to October 15, 1996 that such locations should be included herein
as Business Locations and further provided Seller has not discontinued the
business operations at such Exhibit "A-2" locations prior to Purchasers written
notification, shall be treated as Business Locations.
2. PURCHASE PRICE
A. The purchase price for the Assets described in Section 1.A.
hereof is a sum of money equal to the aggregate value of the Inventory with
each item thereof priced according to Schedule 1.
B. The purchase price for the Assets described in Section 1.B.
hereof shall be a sum of money equal to the aggregate of their net book values
as set forth on Seller's balance sheet for the Business Locations dated as of
the Closing Date.
C. The purchase price for the prepaid expenses, leasehold
improvements and other Assets detailed on Exhibit "D" shall be the aggregate of
their respective net book values as set forth on Seller's balance sheet for the
Business Locations dated as of the Closing Date.
D. The sum of money due Seller by Purchaser for the sale and
purchase respectively of the Assets, as adjusted either upward or downward
according to the provisions of this Agreement, is herein referred to as the
"Purchase Price".
2
<PAGE> 4
3. PHYSICAL INVENTORY
A. A physical accounting of the Inventory shall be taken commencing
as of Seller's close of business on the Closing Date. Such physical inventory
shall be taken cooperatively by representatives of Seller and Purchaser and a
written itemized listing setting forth specifically all such items physically
counted shall be prepared by Seller, which written inventory shall be priced
and extended using the valuation method described in Section 2.A. hereof.
Employees or independent contractors of Seller participating in the physical
inventory shall be compensated solely by Seller, and employees or independent
contractors of Purchaser participating in the physical inventory shall be
compensated solely by Purchaser.
B. Purchaser shall, on the Closing Date, deliver Seller immediately
available United States funds in an amount equal to one hundred percent (100%)
of the value of the Assets described in Sections 1.B. and 1.C. hereof and
eighty percent (80%) of the value of the Inventory shown as being present at
the Business Locations on the financial books and records of Seller as of
Seller's then most recently completed fiscal month.
4. CLOSING
The time of closing of this Agreement shall be at 10:00 a.m. local time,
at the offices of Seller, 15710 John F. Kennedy Boulevard, Suite 700, Houston,
Texas 77032, or at such other time and place or places as the parties may agree
("Closing" or "Closing Date"), on the earlier of (i) the first Friday following
the funding of an initial public offering of Purchaser's equity securities
("IPO") or (ii) at the sole option of Seller, October 25, 1996, or such other
later date upon which Seller provides Purchaser financing in accordance with
the terms set forth in Schedule 2.
5. TRUE-UP
A. It is understood between Seller and Purchaser that the
calculation of the Purchase Price cannot be completed by the time of Closing
and as such the determination of the Purchase Price shall be ascertained on or
before seven (7) calendar days immediately following the Closing Date ("True-Up
Date"). On the True-Up Date, Purchaser shall deliver Seller good funds in an
amount necessary to have, as of the True-Up Date, delivered Seller the Purchase
Price (except as contemplated by Section 5.B. below), or in the unlikely event
the Purchase Price is less than the amount theretofore delivered Seller, the
amount of any excess shall be refunded to Purchaser by Seller's delivery of
good funds in the appropriate amount. In the event Seller and Purchaser cannot
agree upon the Purchase Price, any dispute shall be submitted to arbitration
according to the provisions of Section 5.B.
B. If, by the time of Closing, Seller and Purchaser are unable to
agree to a purchase price for the Inventory, Purchaser shall deliver to Seller
at Closing such sum of money as is mutually agreed upon as then being owed and,
with respect to all disputed items relating to the Inventory purchase price,
submit, within ten (10) days following True-Up, for review and resolution, such
3
<PAGE> 5
disputed items along with work papers, price sheets and other applicable
documents and materials to a mutually acceptable "Big 6" accounting firm or, if
such firm is unable or unwilling to act, to any other accounting firm selected
as hereinafter provided. The charges of such firm (or any other firm selected
as hereinafter provided) with respect to the services performed by it pursuant
to this Section 5.B shall be apportioned by such firm as it may determine on
the basis of each party bearing the expenses of that portion of the review that
relates to disputed items that are resolved not in favor of such party. If the
above firm is not willing or able to act as provided in this Section 5.B., then
for the purposes of resolving disputes under this Section 5.B. only, a firm of
independent Certified Public Accountants shall be selected by the then Chair-
person of the Mississippi Association of Certified Public Accountants, or if
such Chair-person is not willing or able to act, by the first in the order
named of the following then officers of the Mississippi Association of
Certified Public Accountants who is willing and able to act: President, Vice
President (in order of seniority if more than one), Treasurer or Secretary.
The decision of the arbitrating firm or individual as called for in this
Section 5.B. shall be conclusive and binding on Seller and Purchaser for the
purposes of determining the purchase price for the disputed items of Inventory
set forth in Exhibit "B". Purchaser and Seller each represent to the other
that, to the best of each such party's knowledge, the public accounting firm
that has been recommended by each has not performed services that could be
considered a conflict of interest to any arbitration work described in this
Agreement. The use of arbitration in this Agreement is limited solely to the
purposes specifically set forth in this Section 5.B.
6. TAXES
A. Purchaser hereby agrees to be solely responsible for and pay when
due any sales or other transfer tax or impositions and, except as otherwise set
forth in the immediately following sentence, any other tax or impositions that
may be applicable to the transfer of the Assets pursuant to this Agreement.
All personal property taxes shall be equitably prorated between Purchaser and
Seller as of the Closing Date and a corresponding adjustment to the Purchase
Price shall be made at Closing.
7. ASSUMPTION OF CERTAIN OBLIGATIONS. REIMBURSEMENT OF CERTAIN EXPENSES
A. Purchaser hereby specifically assumes all of the following
obligations of Seller with respect to the Business Locations:
(i) All operating and financing leases for vehicles,
telephones, photocopiers, fax machines, and all obligations with
respect to advertising arrangements (including yellow pages
advertising), alarm systems, computer systems, software licenses
and the like, a list of all such material leases and obligations
is set forth in EXHIBIT "E-1" hereto.
(ii) All service and maintenance contracts such as utilities,
trash pick up, alarm
4
<PAGE> 6
monitoring, computer and other equipment maintenance and the
like, a list of all such material service and maintenance
contracts is set forth in EXHIBIT "E-2" hereto.
(iii) All returns of merchandise to the Business Locations
following the Closing Date for warranty reasons.
B. To the extent any operating or financing leases are not
assignable, in whole or in part, Seller will make available to Purchaser the
use of the leased property for a payment to Seller in an amount equivalent to
what the Business Locations (including home office) are being charged therefor.
C. The Purchase Price will be increased by the cost incurred by
Seller in the audit of the business conducted by Seller at the Business
Locations prepared at the request of Purchaser for inclusion in its securities
filings.
8. CONDUCT OF BUSINESS BY PURCHASER AND SELLER
The business at the Business Locations shall be conducted by the Seller
between the date of execution of this Agreement and the Closing Date according
to and in conformity with all material laws, rules and regulations of all
governmental authority.
9. ACCESS TO RECORDS
Between the date of this Agreement's execution and the Closing Date,
Seller shall grant Purchaser and its authorized representatives reasonable
access during normal business hours to the books, records, contracts and
documents of Seller relating to Seller's operation of the Business Locations.
10. RISK OF LOSS
Provided the transactions contemplated by this Agreement close,
Purchaser assumes all risk of loss, destruction or damage to the Assets
purchased hereunder due to fire or other casualty whatsoever effective as of
12:01 a.m. on the Closing Date. Seller assumes all risk of loss, destruction
or damage to the Assets due to fire or other casualty whatsoever until 12:01
a.m. on the Closing Date. In the event of destruction, damage or partial loss
of or to any of the Assets prior to the Closing Date, such Assets shall be
excluded from the purchase provisions of this Agreement.
11. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties:
A. Seller has good title to each, every and all of the Assets.
5
<PAGE> 7
B. The Assets shall be transferred to Purchaser free and clear of
any and all liens, charges, encumbrances, pledges, security interests or rights
of third parties except with respect to current ad valorem personal property
taxes.
C. Seller warrants and covenants that the execution and delivery of
this Agreement, and the consummation of the transactions herein contemplated
does not conflict with or constitute a default under any law or any order,
writ, injunction or decree of any court, governmental agency, bureau or
arbitration tribunal or of any contract, agreement or instrument by which
Seller is bound.
D. Seller is not a party to, subject to or bound by any judgment or
order of any court, agency or other governmental body that could or may prevent
the execution or consummation of the transactions contemplated in this
Agreement. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated herein will violate or result in
a breach of or constitute a default under any judgment, order or decree of any
court or governmental agency to which Seller is subject.
E. There are no actions, suits, arbitrations or other legal or
administrative proceedings pending or, to the knowledge of Seller, threatened
against Seller that relate to the Assets, that could materially and adversely
affect Seller's performance of this Agreement and Seller does not know or have
reason to be aware of any basis for the same.
F. Seller has not made any written or oral agreement to pay any
individual or entity any brokerage commission or finder's fee in connection
with the transactions contemplated by this Agreement.
G. The execution, delivery and performance of this Agreement (and
all other agreements delivered pursuant to this Agreement) and the consummation
of the transactions contemplated hereby (thereby) by Seller have been duly and
validly authorized by all requisite corporate actions and proceedings on the
part of Seller including, without limitation, actions and proceedings of
Seller's board of directors. All documents required by this Agreement (and all
other agreements delivered pursuant to this Agreement) to be executed and
delivered by Seller to Purchaser constitute legally valid and binding
obligations of Seller enforceable according to their terms, except as such
obligations may be affected by laws regarding creditors' rights generally or
the application of general principles of equity.
H. Seller is a corporation duly organized, validly existing and in
good standing under and by virtue of the laws of the State of Tennessee and has
all requisite power and authority to operate a business at the Business
Locations; and the execution, delivery and performance of this Agreement by
Seller will not result in or constitute a breach of any term, provision of, or
default under, Seller's Certificate of Incorporation or by-laws, or any other
agreement or understanding to which Seller is a party or by which it is bound.
6
<PAGE> 8
12. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties:
A. Purchaser is a corporation duly organized, validly existing and
in good standing under and by virtue of the laws of the State of Louisiana, is
duly qualified to conduct business within the state of Mississippi, and has
full corporate power and authority to enter into this Agreement (and all other
agreements delivered pursuant to this Agreement) and to carry out the
transactions contemplated hereby (thereby) and the execution, delivery and
performance of this Agreement (and all other agreements delivered pursuant to
this Agreement) by Purchaser will not result in or constitute a breach of any
term or provision of, or default under, Purchaser's Certificate of
Incorporation or by-laws of Purchaser or any other agreement or understanding
to which Purchaser is a party or by which it is bound.
B. The execution and delivery of this Agreement (and all other
agreements delivered pursuant to this Agreement) and the consummation of the
transactions contemplated hereby (thereby) in accordance with the terms of this
Agreement (and all other agreements delivered pursuant to this Agreement) do
not conflict with or constitute a default under any law or any order, writ,
injunction or decree of any court, governmental agency, bureau or arbitration
tribunal or of any contract, agreement or instrument by which Purchaser is
bound.
C. The execution, delivery and performance of this Agreement (and
all other agreements delivered pursuant to this Agreement) and the transactions
contemplated herein (therein) by Purchaser have been duly and validly
authorized by all requisite corporate actions and proceedings including,
without limitation, actions and proceedings of Purchaser's board of directors.
This Agreement and all documents to be executed and delivered by Purchaser to
Seller pursuant to the terms of this Agreement, constitute legally valid and
binding obligations of Purchaser enforceable according to their terms, except
as such obligations may be affected by laws affecting creditors' rights
generally or the application of general principles of equity.
D. Purchaser has not made any written or oral agreement to pay any
individual or entity any brokerage commission or finder's fee in connection
with the transactions contemplated by this Agreement.
E. Purchaser is not a party to, subject to or bound by any judgment
or order of any court, agency or other governmental body that could or may
prevent the execution or consummation of this Agreement (and all other
agreements delivered pursuant to this Agreement). Neither the execution and
delivery of this Agreement (and all other agreements delivered pursuant to this
Agreement), nor the consummation of the transactions contemplated herein
(therein) will violate or result in a breach of or constitute a default under
any judgment, order or decree of any court or governmental agency to which
Purchaser is subject.
7
<PAGE> 9
F. There are no actions, suits, arbitrations or other legal or
administrative proceedings pending or, to the knowledge of Purchaser,
threatened against Purchaser that could materially and adversely affect
Purchaser's performance of this Agreement and Purchaser does not know or have
reason to be aware of any basis for the same.
G. Purchaser has been provided all information, financial and other,
necessary for Purchaser to make a decision to enter into and perform, pursuant
to the terms of this Agreement (and all other agreements delivered pursuant to
this Agreement), and no representations have been made to Purchaser by Seller
or anyone else as to what the level of performance of Purchaser's business
shall be at the Business Locations.
13. CONDITIONS PRECEDENT TO SELLER'S PERFORMANCE
The performance of obligations of Seller under this Agreement are
subject to each, every and all of the following conditions:
A. Purchaser shall have performed and complied with all agreements
and conditions required by this Agreement to be performed and complied with by
it;
B. The representations and warranties of Purchaser set forth in
Section 12 hereof are, in all material respects, true and correct as of the
Closing Date; and
C. No claim, action, suit, proceeding or investigation shall, to the
knowledge of Purchaser or Seller, be pending or threatened against Purchaser or
Seller which, if adversely determined, would prevent, hinder or invalidate the
consummation of the transactions contemplated by this Agreement, deprive Seller
of any right to be obtained hereunder, or result in the payment of damages by
Seller as a result of such transactions.
D. Purchaser shall have delivered all of the documents, sums of
money, opinions and performed all other acts called for by the provisions of
this Agreement.
Purchaser's failure to meet any or all of the aforesaid conditions
precedent shall relieve Seller from any and all obligations of Seller under
this Agreement.
14. CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The performance of obligations of Purchaser under this Agreement are
subject to each, every and all of the following conditions:
A. Seller shall have performed and complied with all material
agreements and conditions required by this Agreement to be performed and
complied with by it;
8
<PAGE> 10
B. The representations and warranties of Seller set forth in
Section 11 hereof are, in all material respects, true and correct as of the
Closing Date; and
C. No claim, action, suit, proceeding or investigation shall, to the
knowledge of Purchaser or Seller, be pending or threatened against Purchaser or
Seller which, if adversely determined, would prevent, hinder or invalidate the
consummation of the transactions contemplated by this Agreement, deprive
Purchaser of any right to be obtained hereunder, or result in the payment of
damages by Purchaser as a result of such transactions.
D. Seller shall have delivered all of the documents and performed
all other acts called for by the provisions of this Agreement.
Seller's failure to meet any or all of the aforesaid conditions
precedent shall relieve Purchaser from any and all obligations of Purchaser
under this Agreement.
15. SELLER'S DELIVERY AT CLOSING
At the time of the closing, Seller shall deliver or have delivered to
Purchaser the following:
A. A bill of sale in the form of EXHIBIT "F", duly executed by
Seller;
B. A duly executed certificate of the duly authorized Corporate
Secretary of Seller evidencing that the transactions contemplated by this
Agreement are unconditionally authorized by all requisite authority of Seller's
board of directors;
C. Lease assignments and/or subleases in the forms of EXHIBIT "G-1"
thru EXHIBIT "G-12";
D. An opinion of counsel for Seller, addressed to Purchaser, in the
form of EXHIBIT "H-1";
E. A Product Purchase Agreement in the form of EXHIBIT "I"; and
F. Such other documents as may be reasonably necessary to transfer
the Assets or to grant Purchaser any of the rights intending to be given
Purchaser by the terms of this Agreement or any other agreement delivered
pursuant thereto.
16. PURCHASER'S DELIVERY AT CLOSING
at the time of closing, Purchaser shall perform or have performed the
following:
A. Deliver or have delivered to Seller funds in the form and in the
amount required by this Agreement;
9
<PAGE> 11
B. Deliver to Seller a duly executed certificate of the Corporate
Secretary of Purchaser evidencing that the transactions contemplated by this
Agreement are unconditionally authorized by all requisite authority of
Purchaser's board of directors and shareholders;
C. Lease assignments and/or subleases in the forms of Exhibit "G-1"
thru Exhibit "G-12";
D. An opinion of counsel acceptable to Seller, addressed to Seller,
in the form of EXHIBIT "H-2";
E. A Product Purchase Agreement in the form of Exhibit "I"; and
F. Such other documents as may be called for by the terms of this
Agreement or any other agreement delivered pursuant thereto.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties of each of the parties hereto shall
survive Closing.
18. SELLER'S INDEMNIFICATION, HOLD HARMLESS
Seller hereby indemnifies and holds Purchaser harmless from and against
any and all claims, judgments, actions, costs, liabilities, damages, debts,
dues, sums of money, accounts, controversies, reckonings, promises, agreements,
executions at law or in equity (whether direct or consequential) and expenses
whatsoever (including, without limitation, reasonable attorney's fees) that may
be based upon, arise out of or result from any breach of any representation,
warranty, covenant or undertaking of Seller made or pledged in this Agreement.
19. PURCHASER'S INDEMNIFICATION, HOLD HARMLESS
Purchaser hereby indemnifies and holds Seller harmless from and against
any and all claims, judgments, actions, costs, liabilities, damages, debts,
dues, sums of money, accounts, controversies, reckonings, promises, agreements,
executions at law or in equity (whether direct or consequential) or expenses
whatsoever (including, without limitation, reasonable attorney's fees) that may
be based upon, arise out of or result from any breach of any representation,
warranty, covenant or undertaking of Purchaser (including without limitation
the assumption of those liabilities set forth in Section 7) made or pledged in
this Agreement.
20. EMPLOYMENT MATTERS
Purchaser shall have no obligation in respect of, and assumes no
responsibility for, accrued employment benefits of any kind claimed to belong
or belonging to Seller's employees except that Purchaser shall honor the
vacation earned by those employees of Seller employed by Purchaser or
10
<PAGE> 12
an affiliate of purchaser while in Seller's employ and seller shall reduce the
Purchase Price by the value of such accrued vacation obligation.
21. CONDITION OF BUSINESS LOCATIONS
A. Between the date of execution of this Agreement and the Closing
Date, the Purchaser, its employees, agents and contractors may enter upon the
Business Locations at all reasonable times for the purpose of inspecting the
condition of such Business Locations. The Purchaser shall submit to the Seller
a detailed report identifying repairs and replacements (including the estimated
cost for completing such repairs or replacements) pertaining to the Business
Locations, whether interior or exterior, ordinary or extraordinary or
structural or non-structural, which repairs and replacements are necessary in
order for the Business Locations to be in the condition that the respective
Landlords would reasonably require pursuant to the terms of the Business
Locations' leases. The Seller shall make all of the necessary repairs as
herein required.
B. Between the date of execution of this Agreement and the Closing
Date, the Seller may make any alterations, additions or improvements to the
Business Locations. The Purchaser shall be under no obligation to reimburse
Seller for any such alterations, additions or improvements to the Business
Locations unless Purchaser shall have given its prior written consent.
22. COOPERATION OF SELLER AND PURCHASER SUBSEQUENT TO CLOSING
Subsequent to the Closing Date, each of Purchaser and Seller, at the
request of the other, shall execute, deliver and acknowledge all such further
instruments and documents and do and perform all such other acts and deeds as
may be reasonably required to vest more effectively in each such party the
rights intended to be conferred upon such party pursuant to this Agreement.
23. WAIVER OF BULK SALES REQUIREMENT
Seller and Purchaser hereby agree to waive the bulk transfer provisions
of the Uniform Commercial Code as adopted by the State of Mississippi, if any,
subject only to the indemnification provisions of Section 18.
24. NOTICES
All notices, requests and other communications hereunder shall be in
writing and shall be deemed to have been given, if sent by certified mail,
return receipt requested, postage prepaid, as follows:
11
<PAGE> 13
If to Seller, to: Parts, Inc.
c/o A.P.S., Inc.
World Houston Plaza
15710 John F. Kennedy Boulevard, Suite 700
Houston, Texas 77032
Attention: Vice President & General Counsel
If to Purchaser, to: Rankin Automotive Group, Inc.
3711 South MacArthur
Alexandria, Louisiana 71302
Attn: President
with a copy to: Schifino & Fleischer, P.A.
201 North Franklin Street
One Tampa City Center, Suite 2700
Tampa, Florida 33206
Attention: William Schifino, Esquire
or to such other address or addresses to which such parties shall have notified
the other in writing.
25. COUNTERPARTS
This Agreement may be executed simultaneously in any number of
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. MODIFICATIONS
This Agreement constitutes the entire understanding between the parties
hereto with respect to the subject matter hereof and may not be amended or
modified in any respect except by an instrument in writing executed by each of
the parties hereto.
27. EXPENSES
Each party to this Agreement shall pay its own expenses (including,
without limitation, fees and expenses of auditors and legal counsel) incident
to the transactions contemplated by this Agreement.
12
<PAGE> 14
28. ENTIRE AGREEMENT
This instrument, together with any schedules or exhibits attached hereto
and made a part hereof, contains the entire agreement between the parties
hereto with respect to the sale by Seller and the purchase by Purchaser of the
assets described herein and supersedes any and all prior agreements made by the
parties with respect thereto.
29. INVALIDITY
The invalidity of any provision of this Agreement shall not impair the
validity of any other provision. If any provision of this Agreement is
determined by a court of competent jurisdiction to be unenforceable, such
provision shall be deemed severable and this Agreement may be enforced with
such provision severed or as modified by such court.
30. EFFECT OF EXECUTION
Until EXECUTED by all parties, this is a draft and is neither an
agreement between the parties nor an embodiment of any prior oral agreement.
When and if this document is fully executed, it shall become the agreement of
the parties hereto.
31. SECTION AND OTHER HEADINGS
The section and other headings contained in this Agreement are for
reference purposes and shall not in any way affect the meaning or
interpretation of this Agreement. Reference to "Sections," "Exhibits" and
"Schedules" refer to Sections of this Agreement and Exhibits and Schedules
attached or refer-red to in this Agreement. Terms used in the Exhibits and
Schedules that are defined in this Agreement shall have the meaning given them
in this Agreement.
32. INTERPRETATION
This Agreement is to be interpreted according to the laws of the State
of Mississippi.
33. GOVERNING LAW, COURTS
This Agreement shall be construed and enforced in accordance with the
laws of the State of Mississippi without regard to principles of conflicts of
laws. The parties agree that in any dispute between them relating to this
Agreement, exclusive jurisdiction shall be in the trial courts located within
Hinds County, Mississippi, any objections as to jurisdiction or venue in such
courts being expressly waived.
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed as of the day and year first above written.
ATTEST: SELLER:
PARTS, INC.
/s/ RICHARD S. GARFINKEL By: /s/ E. EUGENE LAUVER
- ---------------------------- -------------------------
Richard S. Garfinkel E. Eugene Lauver
Assistant Secretary Vice President
ATTEST: PURCHASER:
RANKIN AUTOMOTIVE GROUP, INC.
By: /s/ RANDALL B. RANKIN
- ---------------------------- -------------------------
Secretary Randall B. Rankin
President
14
<PAGE> 1
EXHIBIT 11.1
APS HOLDING CORPORATION
COMPUTATION OF INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 25, October 25,
------------------- ------------------
1996 1995 1996 1995
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Weighted average shares of common stock outstanding 13,741 13,726 13,733 13,724
Shares issuable on assumed exercise of stock options 200 180 171 185
------- ------ ------- -------
Weighted average shares for primary net income per share 13,941 13,906 13,904 13,909
Incremental shares issuable on assumed exercise of stock
options to reflect maximum dilutive effect 8 0 16 2
------- ------- ------- -------
Weighted average shares for fully diluted net income per share 13,949 13,906 13,920 13,911
======= ======= ======= =======
Net income $ 6,100 $ 5,423 $13,418 $15,242
======= ======= ======= =======
Primary net income per share $ 0.44 $ 0.39 $ 0.97 $ 1.10
======= ======= ======= =======
Fully diluted net income per share $ 0.44 $ 0.39 $ 0.96 $ 1.10
======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 12.0
APS HOLDING CORPORATION
COMPUTATION OF EARNINGS TO FIXED CHARGES
(in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 25, October 25,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Earnings before income taxes and interest $16,535 $12,489 $41,848 $35,987
Portion of operating rents deemed representative
of an interest factor 2,275 1,512 6,943 4,226
------- ------- ------- -------
Earnings before fixed charges $18,810 $14,001 $48,791 $40,213
======= ======= ======= =======
Interest expense $ 6,846 $ 4,053 $20,529 $11,755
Portion of operating rents deemed representative
of an interest factor 2,275 1,512 6,943 4,226
------- ------- ------- -------
Fixed charges $ 9,121 $ 5,565 $27,472 $15,981
======= ======= ======= =======
Earnings to fixed charges 2.1 2.5 1.8 2.5
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (a)
consolidated balance sheet as of October 25, 1996 (unaudited) and the
consolidated statement of operations for the nine months ended October 25, 1996
(Unaudited).
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JAN-28-1996
<PERIOD-END> OCT-25-1996
<EXCHANGE-RATE> 1
<CASH> 12,556
<SECURITIES> 0
<RECEIVABLES> 116,028
<ALLOWANCES> 0
<INVENTORY> 305,345
<CURRENT-ASSETS> 470,008
<PP&E> 43,206
<DEPRECIATION> 0
<TOTAL-ASSETS> 603,420
<CURRENT-LIABILITIES> 170,109
<BONDS> 291,649
137
0
<COMMON> 0
<OTHER-SE> 137,430
<TOTAL-LIABILITY-AND-EQUITY> 603,420
<SALES> 669,463
<TOTAL-REVENUES> 669,463
<CGS> 433,730
<TOTAL-COSTS> 433,730
<OTHER-EXPENSES> 199,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,529
<INCOME-PRETAX> 21,319
<INCOME-TAX> 7,901
<INCOME-CONTINUING> 13,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,418
<EPS-PRIMARY> .97
<EPS-DILUTED> 0
</TABLE>
