SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 20, 1997
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 0-20984 16-0467030
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
415 W. Main Street, Rochester, New York 14608
Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:(716) 235-1595
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Item 5 - Other Events
On August 20, 1997 the Company issued a press release concerning
the approval by the United States Bankruptcy Court for the
Western District of New York (Case No. 97-22809), of an order to
liquidate the store inventory of its wholly-owned subsidiary
AUTOWORKS, Inc. A copy of the press release is annexed hereto as
exhibit 10.1 and is incorporated herein by reference.
Item 7 - Financial Statements and Exhibits
10.1 Press Release dated August 20, 1997.
10.2 Gordon Brothers Contract
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.
HAHN AUTOMOTIVE WAREHOUSE, INC.
(Registrant)
Dated: August 20, 1997 By s// Eli N. Futerman
Title: President
Exhibit 10.1
NEWS BULLETIN
RE: HAHN AUTOMOTIVE WAREHOUSE, INC.
415 West Main Street
Rochester, New York 14608-1944
For Further Information:
AT THE COMPANY
Eli N. Futerman, President
Daniel J. Chessin, Executive Vice President
(716) 235-1595
FOR IMMEDIATE RELEASE
August 20, 1997
HAHN AUTOMOTIVE WAREHOUSE, INC. ANNOUNCES
APPROVAL OF ITS AUTOWORKS SUBSIDIARY INVENTORY LIQUIDATION SALE
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Rochester, New York, August 20, 1997 -- Hahn Automotive
Warehouse, Inc. (NASDAQ: HAHN), a distributor of automotive
aftermarket parts announced that approval has been received from
the United States Bankruptcy Court for the Western District of
New York to liquidate the store inventory of the AUTOWORKS retail
subsidiary. Under the bankruptcy court order, a contract has
been approved with Gordon Brothers Partners, Inc. of Boston,
Massachusetts to transfer substantially all of the assets of the
subsidiary to Gordon Brothers, as agent, for the purpose of
liquidation, effective today. Gordon Brothers will use existing
AUTOWORKS locations for the purpose of conducting a liquidation
sale. Most of the expenses for the operation of the subsidiary
from this point forward will be assumed by Gordon Brothers.
Proceeds from the transfer of the assets, which will amount to
46.5% of inventory cost (85% of which is payable immediately and
the 15% balance based upon inventory verification by Gordon
Brothers and the debtor, AUTOWORKS, Inc., within 14 days) will
initially amount to approximately $10.1 million. These proceeds
will be used to reduce outstanding borrowings under the
AUTOWORKS' credit facility with its banking syndicate and the
senior secured note holder, less certain amounts as required by
the court order.
In addition, the Company has executed a forbearance agreement in
the form of an amendment with its senior secured note holder.
This agreement is aligned with the forbearance agreement between
the Company and its banking syndicate, both of which expire
concurrently on November 30, 1997, in the absence of a default or
unless extended by mutual agreement of the parties.
Hahn Automotive Warehouse, Inc., which is not in bankruptcy, will
continue to operate the wholesale portion of the business which
consists of ten full service distribution centers, three
specialty distribution centers, nine direct distribution centers
and 83 Advantage Auto Stores, in the Midwest and along the
Eastern Seaboard.
Safe Harbor Statement Under the Private Securities Litigation
Reform Act of 1995
The statements contained in this press release which are not
historical facts are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
These matters are subject to risks and uncertainties that could
cause actual developments to differ materially from those
contemplated, including, but not limited to, those discussed
under the heading "Important Information Regarding Forward-
Looking Statements" in Hahn's Annual Report on Form 10-K, dated
December 26, 1996, Current Report on Form 8-K dated July 25, 1997
and Current Report on Form 8-K filed August 11, 1997 (all of
which have been filed with the United States Securities and
Exchange Commission) and Hahn's press releases, and in general,
Hahn's ability to operate within the financial covenants
contained in its credit facilities agreement as modified by the
Forbearance Agreement, and ultimately
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to refinance or replace the bank debt with a permanent credit
facility which provides adequate liquidity for Hahn's operating
and capital needs. Hahn assumes no duty to update the
information contained in this press release at any time.
HAHN HAHN HAHN HAHN
Exhibit 10.2
GORDON BROTHERS PARTNERS, INC.
40 Broad Street
Boston, Massachusetts 02109
August 19, 1997
Daniel J. Chessin
Executive Vice President
Auto Works, Inc.
415 West Main Street
Rochester, New York 14608
Dear Daniel:
Upon execution by Auto Works, Inc., debtor and debtor in
possession ("Merchant"), this letter shall serve as the agreement
(the "Agreement") between Merchant and Gordon Brothers Partners,
Inc. (the "Agent") for Agent to act as Merchant's sole and
exclusive agent to sell all of the merchandise (the
"Merchandise") in Merchant's stores and the distribution center
listed on Exhibit A attached (including such distribution center,
the "Stores" and individually a "Store") by means of promotional,
"Store Closing, Total Liquidation, Going Out of Business," or
similar sale (the "Sale"). After the date hereof, Stores shall
only be closed by mutual agreement of Agent and Merchant. In
consideration of the mutual promises and covenants contained
herein and other good and valuable consideration, Merchant and
Agent agree as follows:
1. AGENCY. Merchant appoints Agent its exclusive agent for
the purpose of conducting the Sale of the Merchandise located at
the Stores. Merchant shall be responsible, with Agent's
assistance, for securing any required licenses and permits and
complying with any "going-out-of-business" laws, rules,
ordinances and regulations not superseded by order of the United
States Bankruptcy Court with appropriate jurisdiction (the
"Approval Order") referred to in Section 28. Merchant shall pay
any fees and expenses incurred and post any bonds required in
connection with such licenses and permits.
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2. INVENTORY. (a) As soon as practicable after the Approval
Order, Merchant and Agent shall cause to be taken an SKU physical
inventory of the Merchandise in the Stores (the "Inventory
Count"), which Inventory Count and certification by the Inventory
Service shall be completed within fourteen (14) days after the
date of the Approval Order. The date that the Inventory Count is
taken in each Store shall be referred to as to each Store as the
"Inventory Date". The Inventory Count shall be taken by RGIS or
another independent inventory service, in any case approved by
both Merchant and Agent (the "Inventory Service"), the costs of
which shall be shared equally by the parties. Each Store shall
be closed during the Inventory Count and during the Inventory
Count, neither Merchant nor Agent shall enter such Store without
each having a representative present. The Merchandise shall be
valued on the basis of Cost Price (as defined below).
(b) From the Start Date until the Inventory Count
is taken in each Store, Agent and Merchant shall jointly keep a
strict count of gross register receipts less applicable sales tax
("Gross Rings") and cash reports of sales within each Store. The
register receipts shall show for each item sold the retail price
of such item and the store wide or other discount granted by
Agent in connection with such sales. All such records and
reports shall be made available to Agent and Merchant during
regular business hours upon reasonable notice. All Merchandise
sold during such period shall be valued for purposes of the
Guaranteed Return at the Cost Price (as defined below).
(c) Agent shall at Merchant's option accept
returns of goods in accordance with Merchant's normal return
policies, which shall be included in the Merchandise and valued
at 46.5% (or other percentage provided in Section 5(b) or agreed
upon pursuant to Section 3) of its Cost Price, less the
percentage of the store wide discount then prevailing in the
Stores (but without discount for returns within the first ten
(10) days after the Start Date) (the "Return Credit"). Merchant
shall reimburse Agent for its refund or credit in accepting such
returns less the Return Credit. Merchant shall have no
responsibility whatsoever for any returns of Merchandise sold on
or after the Start Date.
3. COST PRICE. The term Cost Price herein shall mean the
aggregate of the line item unit cost prices (including core
charges) as set forth in Merchant's files of the respective items
of all the Merchandise. Merchandise shall include all goods
owned by Merchant and located at the Stores on the Start Date,
except: (i) core goods; and (ii) furniture, fixtures, equipment
and improvements to realty located in the Stores. Merchant and
Agent shall agree upon a price for damaged, display, clearance
and out-of-season goods.
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4. SALE TERM. The Sale shall start the day after the Approval
Order is obtained and shall end no later than the close of
business at each Store the seventy-second (72nd) day from the
first Saturday occurring on or after the Start Date (except with
respect to the distribution center, with respect to which the
Sale shall end the ninetieth (90th) day from the Start Date)
unless extended by agreement of the parties (the "End Date").
Agent may terminate the Sale prior to the End Date at any Store
in its discretion by providing written notice thereof to Merchant
at least fourteen (14) days prior to any such early termination
date (or seven (7) days during the last twenty-one (21) days
prior to the End Date). At the conclusion of the Sale, Agent
agrees to leave the Stores in "broom clean" condition, except
that the remaining Supplies (as defined in Section 10 hereof)
shall be left in the Stores, and to leave the Stores in the same
condition as on the Start Date, ordinary wear and tear excepted.
5. GUARANTEE. (a) Agent hereby guarantees to Merchant that
Merchant shall receive an aggregate amount from the Proceeds (as
defined in this Section) equal to forty-six and one-half percent
(46.5%) percent of the Cost Price (the "Guaranteed Return").
Agent shall advance eighty-five percent (85%) of the Guaranteed
Return as estimated based on the Merchant's invoice unit cost as
carried on the Merchant's books on the Start Date, and as a
condition to commencement of the Sale, within one (1) business
day after the date of the Approval Order and the remainder of the
Guaranteed Return within one (1) business day of the
certification of the Cost Price by the Inventory Service. All
payments to Merchant pursuant to the preceding sentence shall be
made by wire transfer and shall be nonrefundable. Agent's
advance of the Guaranteed Return shall be recovered without
interest solely from the Proceeds of the Sale of the Merchandise
and the proceeds of insurance, if any, for loss or damage to the
Merchandise, or robbery of cash to the extent of insurance
coverage of Agent or Merchant (collectively, the "Proceeds"), and
Merchant shall have no obligation if such Proceeds are
insufficient for that purpose. Any Merchandise remaining at the
end of the Sale shall be the sole property of the Agent.
(b) If the Cost Price of the Merchandise is
less than $23,250,000, the Guaranteed Return shall be reduced by
one-quarter percent (.25%) of the Cost Price from the forty-six
and one-half percent (46.5%) thereof set forth above, and by an
additional one-quarter percent (.25%) for each additional full
Five Hundred Thousand Dollars ($500,000) reduction increment
thereafter.
6. SALE CONDUCT. Agent shall conduct the Sale in the name of
Merchant in the manner in which Agent in its discretion
reasonably deems fit, including, but not limited to, advertising,
pricing of Merchandise, number and type of personnel, Store
hours, Store maintenance and security, but in all events in
accordance with all applicable laws, ordinances and regulations
(to the extent not
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superseded by the Approval Order). Agent may advertise the Sale
as a "Store Closing, Total Liquidation, Going Out of Business" or
similar type sale and may use Merchant's contract advertising
rates, if available. Agent may use Merchant's employees to the
extent Agent deems feasible, and Agent may select and schedule
the number and type of Merchant's employees required for the
Sale, however, Merchant's employees shall at all times remain
employees of Merchant. On and after the Start Date, Agent
shall, as an Expense of Sale, as hereinafter defined, pay to
Merchant by wire transfer received by Merchant within twenty-four
(24) hours of invoice by Merchant, the gross wage payroll paid to
Merchant's employees used in the Stores by the Agent during the
Sale plus (a) the related payroll taxes (including FICA and
Unemployment), and (b) health care insurance benefits
(subsections (a) and (b) collectively, the "Benefits") not in
excess of thirteen percent (13%) of said gross payroll (the
"Fringe Benefit Cap"). Any amounts in excess of the Fringe
Benefit Cap shall be at Merchant's Expense, as hereinafter
defined. Merchant and Agent acknowledge and agree, that (i)
nothing herein nor any of Agent's actions taken in respect hereto
shall be deemed to constitute an assumption by Agent of any of
Merchant's obligations relating to any of Merchant's employees
including, without limitation, vacation, pension, withdrawal,
severance pay, vacation pay, sick leave or pay, maternity leave
or pay, Worker Adjustment Retraining Act ("WARN") claims (if any)
and other termination type claims and obligations; and (ii)
Merchant hereby indemnifies Agent in respect to any claims
asserted by any of Merchant's employees, except as to claims
arising out of the negligence or wrongful act or omission of
Agent, and Merchant is solely and specifically responsible for
all of Merchant's obligations under any collective bargaining
agreements and any purported oral service contracts.
7. EXPENSES OF SALE. Agent shall collect all Proceeds and,
within twenty-four (24) hours after presentation of an invoice
therefor (to be provided no more than weekly), shall pay all
"Expenses of Sale." Expenses of Sale shall be (i) the actual
gross wage payroll paid to Merchant's employees used in the
Stores and in the transfer of Merchandise between the stores by
the Agent during the Sale plus the actual cost of the Benefits
for such employees not to exceed the Fringe Benefit Cap; (ii) all
advertising expenses; (iii) all signage for the Sale; (iv)
security in the Stores; (v) bank card fees and chargebacks; (vi)
telephone charges for the Stores in excess of base charges; (vii)
Agent's supervision expenses; (viii) occupancy expenses for each
Store during the Sale on a per diem basis of $1,600.00 per Store
per week (except with respect to the distribution center which
shall be $4,050 per day), (ix) cost of transferring inventory
between the Stores (including transfers prior to the Start Date
at the Agent's request) at Merchant's freight rate of 1.115 cents
per mile, (x) postage, armored car and courier and (xi) any other
expenses directly attributable to the Sale authorized by Agent.
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8. MERCHANT'S EXPENSES. During the Sale, Merchant shall be
responsible for payment of the following items none of which
shall be deemed an Expense of Sale: (i) all occupancy expenses in
excess of the occupancy expenses to be paid by Agent pursuant to
Paragraph 7 above; (ii) any Benefits in excess of the Fringe
Benefit Cap; (iii) all other employee benefits, including but not
limited to union dues, termination pay, pension benefits,
severance pay, vacation pay, sick leave or pay, maternity leave
or pay and WARN claims (if any); (iv) major maintenance; (v)
central administration services and (vi) any other costs or
expenses that are not an Expense of Sale (except to the extent
incurred by or at the direction of Agent).
9. TAXES. Agent shall collect all sales, excise and gross
receipts taxes (and not income taxes) (collectively the "Sales
Taxes") payable to any taxing authority having jurisdiction,
which taxes shall be added to the sales price and be paid by the
customer at the time Merchandise is purchased. Agent shall
immediately forward all Sales Taxes to Merchant and Merchant
shall file all necessary tax returns, reports and forms for Sales
Taxes. Merchant shall indemnify and hold Agent harmless from and
against any and all costs (including, but not limited to,
reasonable attorneys' fees), assessments, fines or penalties
which Agent may incur as a direct or indirect consequence of the
failure by Merchant to pay Sales Taxes (that have been forwarded
from Agent to Merchant on a timely basis) to the proper taxing
authorities and/or the failure by Merchant to promptly file with
taxing authorities any and all returns, reports and other
documents required by applicable law to be filed or delivered to
such taxing authorities.
10. SUPPLIES. Agent shall have the right to use in connection
with the Sale, without any charge, all signs and promotional
materials, and supplies, including, but not limited to, bags,
boxes, twine, paper and similar sales materials ("Supplies"),
located at the Stores on the Start Date. Agent shall have no
obligation to account to Merchant for any of the Supplies used
during the Sale, but all Supplies remaining in the Stores on the
End Date shall be left on the premises and remain Merchant's
property. Should additional Supplies be required in any of the
Stores during the Sale, Agent shall obtain such additional
supplies at Agent's expense (at Merchant's contract rate, if
available). Merchant covenants and warrants that it has not and
will not remove any Supplies from the Stores in contemplation of
this Agreement and has continued to ship supplies to the Stores
in the ordinary course of business.
11. CREDIT CARDS, GIFT CERTIFICATES AND RETURNS. All sales
shall be for cash or upon bank credit cards (excluding private
label cards). During the Sale, all bank credit card sales shall
be through Merchant's bank credit card system. All bank card
fees including chargebacks in connection with the Sale shall be
an Expense of Sale. All sales shall be advertised, "FINAL," and
all
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sales receipts shall be marked "FINAL." Agent shall accept
Merchant's unexpired gift certificates during the Sale. Gift
Certificates shall be treated as cash and the Merchant shall pay
to Agent the amount thereof redeemed, which shall be added to
Proceeds.
12. MERCHANT'S WARRANTIES. Merchant hereby warrants and
represents:
a. Merchant is a corporation, duly and validly
existing and in good standing under the laws of the State of
Michigan. Merchant is and during the Sale will be authorized and
duly qualified as a foreign corporation to do business and is in
good standing in all jurisdictions in which the Stores are
located.
b. Subject to entry of the Approval Order, (i)
this Agreement and all other documents executed by Merchant in
accordance with this Agreement are the valid and binding
obligations of Merchant enforceable in accordance with their
terms; (ii) Merchant has taken all necessary corporate action
required to authorize the execution, performance and delivery of
this Agreement and the related documents; (iii) no court order or
decree of any federal, state or local government authority, or
other action known to Merchant, is in effect which will or may
prevent or impair consummation of the transactions contemplated
by this Agreement; and (iv) the consent of any person or entity,
including any landlord, is not required with respect to the
obligations on the Merchant's part contemplated herein;
c. Subject to entry of the Approval Order, Agent
shall be entitled to sell the Merchandise and retain all Proceeds
therefrom, subject to section 5, free and clear of all liens,
mortgages, pledges, charges, encumbrances, equities or claims
whatsoever.
d. Merchant shall not ship new goods into the
Stores without Agent's consent (except for shipments of Auto
Works goods only from the distribution center to stores) nor
raise any prices of the Merchandise in contemplation of the Sale.
The Stores shall be operated in the ordinary course from the date
hereof until the Start Date (subject to the understanding that
the inventory of the Stores has not been replenished in the
ordinary course of business).
e. Subject to entry of the Approval Order, no
actions or proceedings have been instituted against Merchant or
have been threatened, preventing or which may prevent the
consummation of the transactions contemplated by this Agreement.
Merchant is current on all accounts payable accruing after the
filing of Merchant's bankruptcy, due and owing to parties whose
cooperation is necessary for operation of the Sale, including but
not limited to landlords, newspapers and utilities.
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f. Merchant represents and warrants that it will
not prior to or during the Sale grant any lien or encumbrance on
the Merchandise or the Proceeds which would conflict with the
provisions of this Agreement.
g. Subject to entry of the Approval Order, there
is no outstanding order, judgment, injunction award or decree of
any court, governmental or regulatory body or arbitration
tribunal by which the Merchant or the Merchandise is bound which
would materially interfere with the transactions herein, and
there shall be no action, suit, claim, legal, administrative or
arbitral proceedings (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance) against
the Merchant or the Merchandise which would, if determined
adversely to the Merchant, be likely to have a material adverse
effect upon the transactions contemplated hereby, nor are there
any facts which are likely to give rise to any such action, suit,
claim or legal, administrative or arbitral proceeding or
investigation.
h. During the Sale Term, Agent shall be
permitted to pass on all applicable manufacturers warranties to
customers.
i. The historical margins on the Merchant's
sales for the periods covered by the Merchant's ADM-068
Jobber/Sales Analysis report provided to Agent are as represented
in such report.
j. Merchant represents and warrants that it has
not raised any prices in contemplation of the Inventory Count.
k. The Merchandise shall have an aggregate Cost
Price value of no less than twenty million dollars ($20,000,000).
l. There shall be a minimum of eighty-two (82)
Stores, excluding the distribution center.
13. AGENT'S WARRANTIES. Agent hereby warrants and represents:
a. Gordon Brothers Partners, Inc. is a corporation,
duly and validly existing and in good standing under the laws of
the Commonwealth of Massachusetts, and is, and during the Sale
will be, authorized and duly qualified to do business in each
jurisdiction where the failure to so qualify would have a
material adverse effect on its ability to perform hereunder.
d. (i) This Agreement and all other documents executed by Agent
in accordance with this Agreement are the valid and binding
obligations of Agent enforceable in accordance with their terms;
(ii) Agent has taken all necessary action required to authorize
the execution, performance and delivery of this Agreement and the
related documents; (iii) no court order or
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decree of any federal, state or local government authority, or
other action known to Agent, is in effect which will or may
prevent or impair consummation of the transactions contemplated
by this Agreement; and (iv) the consent of any person or entity,
is not required with respect to the transactions contemplated
herein.
e. There is no outstanding order, judgment,
injunction award or decree of any court, governmental or
regulatory body or arbitration tribunal by which the Agent is
bound which would materially interfere with the transactions
herein, and there is no action, suit, claim, legal,
administrative or arbitral proceedings (whether or not the
defense thereof or liabilities in respect thereof are covered by
insurance) pending or threatened against the Agent which would,
if determined adversely to the Agent, be likely to have a
material adverse effect upon the transactions contemplated
hereby, nor are there any facts which are likely to give rise to
any such action, suit, claim or legal, administrative or arbitral
proceeding or investigation.
14. NON COMPETE. During the Sale, neither Merchant nor any
affiliate of Merchant shall run a store closing, liquidation or
similar sale in competition with the Sale at any store trading
under the Auto Works name within the advertising area of any of
the Stores without the prior written approval of Agent.
15. INSURANCE. a. Merchant at its expense shall continue until
the End Date, in such amounts as Merchant currently has in
effect, all of Merchant's liability insurance policies, including
but not limited to, comprehensive public liability policies
covering injuries to persons and property in or in connection
with Merchant's operation of the Stores and, from and after the
acceptance by Merchant of this Agreement, shall cause Agent to be
named as additional insured, as its interests may appear, with
respect to all such policies. On or before the Start Date,
Merchant shall deliver to Agent certificates evidencing such
insurance policies, setting forth the duration thereof and the
naming of Agent as an additional insured, as its interests may
appear, in accordance with the provisions hereof, all in form
reasonably satisfactory to Agent. In the event that Merchant is
self insured or has deductibles or retentions in excess of Fifty
Thousand Dollars ($50,000), Agent shall be permitted to obtain
for Merchant's account insurance to cover such self insurance
amount or deductible, the cost of which shall be billed to and
paid by Merchant. Merchant shall be responsible for the payment
of all deductibles, retentions or self-insured amounts under such
policies except in the event liability arises by reason of the
negligence or wrongful act or omission of Agent or Agent's
independent contractors. Merchant's liability policy shall be
primary, except in the event of liability arising by reason of
the negligence or wrongful act or omission of Agent or Agent's
independent contractors.
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b. Merchant at its expense shall provide fire,
theft and extended coverage casualty insurance on the Merchandise
in a total amount at least equal to the cost value thereof. From
and after the Start Date, said coverage will contain a loss
payable clause in Agent's favor. In the event of a loss to the
Merchandise included in the Inventory Count occurring on or after
the Start Date, the proceeds of such insurance attributable to
the Merchandise shall be paid to Agent and such proceeds shall be
included as part of the Proceeds. On or before the Start Date,
Merchant shall deliver to Agent certificates evidencing such
insurance policies, setting forth the duration thereof and the
naming of Agent as a loss payee in accordance with the provisions
hereof, all in form reasonably acceptable to Agent. In the event
that Merchant is self insured or has deductibles in excess of
Fifty Thousand Dollars ($50,000), Agent shall be permitted to
obtain for Merchant's account insurance to cover such self
insurance amount or deductible, the cost of which shall be billed
to and paid by Merchant. Merchant shall be responsible for the
payment of all deductibles or self-insured amounts under such
policies except in the event liability arises by reason of the
negligence or wrongful act or omission of Agent or Agent's
independent contractors.
c. Merchant shall at all times during the Sale
maintain in full force and effect Worker's Compensation Insurance
in compliance with all statutory requirements.
d. During the performance and length of this
Agreement, Agent will maintain workers compensation, commercial
general liability and automobile liability insurance and will
name Merchant as an additional insured on all such policies, and
will, prior to the Start Date, furnish the Merchant with
certificates showing that such insurance is in effect.
16. PEACEFUL POSSESSION AND USE OF MERCHANT'S ASSETS. Merchant
agrees during the Sale to grant and provide Agent peaceful and
quiet possession of the Stores and to take no action relating to
the Stores which would disturb such possession, including,
without limitation, any action to modify or terminate any
existing ADT or similar security system or cash register
maintenance agreements or remove any of the furniture, fixtures
or equipment from the Stores. Merchant agrees to maintain in
operation at the expense of Merchant for the benefit of Agent (i)
the point of sale equipment in the Stores during the period of
the Sale and (ii) the management information systems during the
period of the Sale and for a period of ten (10) days after the
End Date. Merchant shall maintain all mechanical systems and
equipment in the Stores. Agent shall have the right to use,
solely for lawful purposes in furtherance of the Sale, Merchant's
property located at or used in connection with the Stores and
warehouse in the ordinary course of business, including without
limitation, trade names, trademarks, customer lists, credit card
equipment, supplies and services, tax identification numbers,
computer systems, central office services
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and subject to the above right to remove furniture, fixtures and
equipment. From the Start Date until such time as Agent notifies
Merchant that Agent has established bank accounts for receipt of
the Proceeds, the Proceeds (including all bank card deposits)
shall be deposited in Merchant's accounts in trust for Agent and
transferred daily by wire to Agent with Agent paying to Merchant
all costs of wiring the funds.
17. INDEMNIFICATION. Agent and Merchant each agree to
indemnify and defend and hold harmless the other from any and all
demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including,
without limitation, interest, penalties and reasonable attorneys'
fees, costs and expenses, asserted against, resulting to or
imposed upon Merchant or Agent, directly or indirectly, by reason
of or resulting from either's (i) material breach or failure to
comply with any of the agreements, covenants, representations or
warranties contained in this Agreement, or (ii) any negligent or
wrongful act or omission of either or their respective
employees.
18. DEFAULT. a. For the purposes of this Agreement, an "Event
of Default" shall be deemed to have occurred:
(1) upon the failure by Merchant or Agent to
perform promptly and fully any material obligation or covenant
hereunder or any material obligation or covenant in any document
delivered pursuant hereto or any collateral agreement to this
Agreement after having received five (5) days' prior written
notice, except in the case of a nonmonetary default which is
incapable of being cured within such notice period and as to
which the defaulting party diligently proceeds to cure said
default and (a) the party in default has taken all steps
necessary to commence to cure such default within such notice
period and (b) such failure to cure, in the case of a default by
Merchant, will not adversely affect, in any material way, Agent's
ability to conduct the Sale in the manner contemplated herein or
in the case of a default by the Agent, the Merchant's practical
realization of the benefits to be conferred upon it by this
Agreement;
(2) if any of the warranties or
representations made by Merchant or Agent herein proves to be
untrue or false in a material way;
(3) if any breach of this Agreement by
Merchant results in the Agent being unable to conduct or complete
the Sale at any Store as contemplated herein; or
(4) if any breach of this Agreement by Agent
adversely affects the Merchant's realization of the benefits to
be conferred upon it by this Agreement.
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b. In the event of the occurrence of an
Event of Default resulting from any act or omission of Merchant
which prevents Agent from conducting or completing the Sale at
any Store as provided by this Agreement, Agent may, at its
option, either (i) proceed with the Sale at the Store location(s)
affected or (ii) require Merchant, at Merchant's expense, to move
the Merchandise to another reasonably proximate Store designated
by Agent, or (iii) notify Merchant as to the termination of the
Sale as to the particular Store location, in which event, the
remaining Merchandise in such Store shall be returned to Merchant
and Merchant shall reimburse to Agent the portion of the
Guaranteed Return attributable to such Merchandise, and
commencing with the fifth (5th) Store for which the Sale has been
terminated as a result of a Merchant Event of Default, Merchant
shall within two (2) business days pay Agent an amount equal to
an amount as liquidated damages equal to two percent (2%) of the
Cost Price of the remaining Merchandise in such Store. Merchant
acknowledges that Agent would be irreparably injured in the event
of any failure by Merchant to promptly and fully perform any
obligation hereunder if such failure directly or indirectly
interferes with the conduct by Agent of the Sale, and hereby
consents, in the event of any such failure or in the event that
any such failure is threatened or appears imminent, to the entry
of an injunction specifically enforcing the terms of this
Agreement.
c. No right or remedy granted in or
pursuant to this Agreement shall be exclusive of any other right
or remedy so granted or otherwise available. Every such right or
remedy shall be cumulative and shall be in addition to every
other right or remedy so granted or existing at law or in equity
or by statute, or created, granted or existing pursuant to any
agreement to which Agent and/or Merchant is or may hereafter
become a party.
19. ADDITIONAL MERCHANDISE. If permitted by applicable law (as
same may be modified by the Approval Order), Agent shall have the
right to include in the Sale additional merchandise ('Additional
Merchandise') having an aggregate original retail price of up to
$5,000,000, which Additional Merchandise shall be similar in
quality and type as Merchandise presently located in the Stores.
Agent agrees to pay Merchant a commission relative to the sale of
Additional Merchandise in an amount equal to 10% of sale of
Additional Merchandise (net of all Sales Taxes relative to such
sales).
20. JURISDICTION. This Agreement shall be governed and
construed in accordance with the laws of the State of New York
without regard to the conflicts of laws principles thereof except
where governed by the provisions of the United States Bankruptcy
Code.
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21. ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties with respect to these transactions and
supersedes and cancels all prior agreements including, but not
limited to all proposals, letters of intent or representations,
written or oral, with respect thereto.
22. MODIFICATIONS. This Agreement may not be modified except in
a writing executed by each of the parties.
23. ASSIGNMENT. Except as specifically provided in this
Section, or upon written consent of the parties hereto, this
Agreement shall not inure to the benefit of, or, shall not be
assignable to, any person or entity other than Merchant and
Agent. All of the terms and provisions of this Agreement shall
be binding upon, inure to the benefit of, and be enforceable by
the successors in interest of the respective parties hereto,
including any trustee appointed in Merchant's bankruptcy case.
24. NOTICES. All notices under this Agreement shall be sent by
hand, by recognized overnight courier service or by certified
mail, return receipt requested to: (a) Merchant at the address
listed on the first page hereof, to the attention of Daniel J.
Chessin with a copy to Paul S. Groschadl, Esq., Woods, Oviatt,
Gilman, Sturman & Clarke LLP, 44 Exchange Street, Rochester, New
York 14614; (b) Agent, at the address listed on the first page
hereof to the attention of Traub, Bonacquist & Fox, 489 Fifth
Avenue, New York, New York 10017, fax (212) 476-4237, Attn:
Steven E. Fox, Esq.
25. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
Such execution may be by facsimile. Any party signing via
facsimile shall forward an original hard copy of such signature
to the other party, but the failure to send said original
signature shall not affect the enforceability of this Agreement
against such party, the parties hereto agreeing that a facsimile
signature may be treated as an original signature hereunder.
27. CONFIDENTIALITY. Agent acknowledges that in the course of
its dealings with Merchant it will become privy to material non-
public information about Merchant and its parent, Hahn Automotive
Warehouse, Inc. (a corporation whose stock is publicly traded)
and its affiliates. Agent agrees to hold all such material non-
public information in strict confidence.
28. CONDITIONS PRECEDENT. This Agreement shall be subject to
the approval of the Bankruptcy Court having jurisdiction over
Merchant's bankruptcy proceeding by an order of such court
approving this Agreement in its entirety (the "Approval Order").
The Approval Order shall provide that: (a) this Agreement is in
the best interests of Merchant, Merchant's estate, creditors and
15
other parties in interest; (b) this Agreement (and each of the
transactions contemplated hereby) is approved in its entirety;
(c) Merchant and Agent shall be authorized to take any and all
actions as may be necessary and desirable to implement this
Agreement and each of the transactions contemplated hereby; (d)
Agent shall be entitled to all sums due Agent hereunder free and
clear of all liens, claims or encumbrances and all liens and
encumbrances shall be transferred to fund created upon payment of
Guaranteed Return with the same priority and effect; (e) Agent
shall have the right to use the Stores and all furniture,
fixtures and equipment in the Stores for the purpose of the Sale
free of any interference from any person; (f) Agent, as agent for
Merchant, is authorized to conduct the Sale as going out of
business, liquidation or similar type sale ("GOB Sale"); (g)
Agent is authorized to post signs, advertise and otherwise
promote the Sale as a GOB Sale without further consent of any
third person; (h) each and every federal, state or local agency,
department or governmental authority (collectively "Governmental
Authority") and all newspapers and other advertising media shall
be directed to accept the Approval Order as binding to consummate
the transactions provided for in the Agreement, including,
without limitation, the conducting and advertising of the Sale as
a GOB Sale, and no further approval, license or permit of any
Governmental Authority shall be required; (I) all utilities,
landlords, creditors and all persons acting for or on their
behalf are restrained and enjoined from interfering with or
otherwise impeding the conduct of the Sale, instituting any
action in any court (other than the Bankruptcy Court) or before
any administrative body which may in any way directly or
indirectly interfere with or obstruct or impede the conduct of
the Sale or to take any action which in any way interferes with
Agent's receipt of the sums due Agent pursuant to this Agreement;
(j) the Bankruptcy Court shall retain jurisdiction over the
parties to enforce this Agreement; (k) Agent shall not be liable
for any claims against the Merchant and Agent shall have no
successorship liabilities whatsoever; (l) Agent shall be entitled
to the protection of sections 363 (m) and 364 (e) of the
Bankruptcy Code in the event that the Approval Order is reversed
or modified on appeal; and (m) Agent's claims hereunder shall be
entitled to priority under section 507 (a) (1) of the Bankruptcy
Code. In the event the Approval Order is not entered by the
close of business on August 29, 1997, Agent or Merchant shall
have the right to terminate this Agreement.
29. Furniture, Fixtures and Equipment. Subject to the
provisions and terms of Section 30 hereof, Agent will sell, on
behalf of Merchant, all of the furniture, fixtures and equipment
("FF&E") in the Stores during the Sale Term at a commission of
fifteen percent (15%) of the sales price. Merchant shall
reimburse Agent for the reasonable actual expenses incurred by
Agent in advertising the sale of the FF&E, up to a maximum
reimbursement of $5,000.00, subject to the provisions and terms
of Section 30 hereof. Any sale of FF&E by the Agent is subject
to
16
the prior written approval of Merchant. All FF&E sold by Agent
on Merchant's behalf must be removed by Agent from each Store
prior to the date on which the Sale is terminated for such Store.
30. DISPOSITION OF INVENTORY, LEASES AND FF&E. As additional
consideration and as further inducement for the parties to enter
into this Agreement, Merchant hereby grants unto Agent an
unconditional exclusive option to market and sell Debtor's leases
(collectively, the "Leases") and FF&E for the Stores for the
duration of the Sale at each such Store (exclusive of the
distribution center), subject to the extension of the sale by
agreement of the parties hereto (the "Lease Option" and "Lease
Option Term"), subject further to the issuance and entry of an
order of the Bankruptcy Court, inter alia, authorizing Merchant's
assumption and assignment of any such Lease(s) to a third party
("Assignment Order'). Agent hereby agrees that in the event that
Agent sells as a complete package the Lease, inventory and FF&E
at any of the Stores (a "Sales Transaction") during the term of
the sale thereat and during the Lease Option Term, then Agent
shall pay Merchant an additional sum equal to fifteen percent
(15%) of the net proceeds (i.e., gross proceeds less direct costs
attributable to the marketing and disposition of any Lease(s) and
closing costs) received by Agent for the inventory as part of any
such Sale Transaction; provided, however, that any purchase
agreement in respect of a Sale Transaction shall contain an
allocation of the sale proceeds as between the Store Lease, FF&E
and inventory; provided, further, that solely with respect to
sales of Leases and FF&E as part of a Sale Transaction, Agent
shall receive fifteen percent (15%) of amounts received on
account of an allocated to any Lease(s) and FF&E as part of said
Sale Transaction (consistent with Section 29 hereof as to FF&E
dispositions), with the balance received on account of said
Leases and FF&E being paid to Merchant; provided, further, that
Merchant may for a period of twenty (20) days from the date
hereof, identify in writing up to thirty-two (32) Store Leases
that Agent shall not market or sell, following which twenty 920)
day period Agent shall be entitled to market and sell any Lease
previously excluded herefrom by Merchant. Upon Agent's written
direction to Merchant, Merchant shall promptly seek an Assignment
Order, inter alia, authorizing and approving Merchant's
assumption and assignment of such Lease(s) as Agent shall direct.
Please acknowledge your acceptance hereof by signing a copy and
returning it to us.
Very truly yours,
GORDON BROTHERS PARTNERS, INC.
By: /s/ Jeff M. Wolf
Its: Vice President
17
ACCEPTED THIS 19TH DAY OF
AUGUST, 1997.
AUTO WORKS, INC.
Debtor and Debtor in Possession
By: /s/ Eli Futerman
Its: CEO
EXHIBIT A
LIST OF STORES
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