As filed with the Securities and Exchange Commission on October 22, 1997
Registration No. 333-33181
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________
AID AUTO STORES, INC.
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(Exact name of Registrant as Specified in Its Charter)
DELAWARE
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(State or Other Jurisdiction of Incorporation or Organization)
11-2254654
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(I.R.S. Employer Identification No.)
275 Grand Boulevard
Westbury, New York 11590-0281
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(Address, Including Zip Code, and Telephone Number, Including Area Code
of Registrant's Principal Executive Offices)
PHILIP L. STEPHEN
275 Grand Boulevard
Westbury, New York 11590-0281
(516) 338-7889
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(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent For Service)
____________________________
Copies of all communications, including all communications sent to
the agent for serice, should be sent to:
GART T. MOOMJIAN, ESQ.
Breslow & Walker, LLP
767 Third Avenue
New York, New York 10017
(212) 832-1930
____________________________
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
Interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
of the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement becomes effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
____________________________
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
which is a part of this Registration Statement shall relate to, among other
securities, certain of the Warrants and shares of Common Stock, par value
$.001 per share, previously registered under Registration Statement on Form SB-2
(No. 33-89190).
<PAGE>
CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed
Proposed Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price per Offering Registration
Security to be Registered Registered Security Price Fee
- ------------------------- ---------- --------- ---------- ------------
Common Stock, par value
$.001 per share (1) 2,070,000 $4.00 $8,280,000 *
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Common Stock, par value
$.001 per share (2) 180,000 $7.90 $1,422,000 *
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Warrants, each to purchase
one share of Common Stock(2) 180,000 $.158 $ 28,440 *
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Common Stock, par value
$.001 per share (3) 180,000 $6.60 $1,188,000 *
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Common Stock, par value
$.001 per share (4) 157,596 $2.81 (5) $ 442,845 $134.20
- ------------------------------------------------------------------------------
Common Stock, par value
$.001 per share (6) 250,000 $2.81 (5) $ 702,500 $212.88
- ------------------------------------------------------------------------------
Common Stock, par value
$.001 per share (7) 75,000 $2.34 (8) $ 175,500 $ 53.18
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Fee Previously Paid................................................. $347.08
Amount Owed......................................................... $ 53.18
==============================================================================
*Filing fee not required. Previously registered and included herein pursuant to
Rule 429.
(1) Issuable upon exercise of publicly traded redeemable Warrants.
(2) Issuable upon exercise of the Underwriter's Warrants. This Registration
Statement also relates to the resale of these securities by the holders
thereof or their transferees.
(3) Issuable upon exercise of the warrants underlying the Underwriter's
Warrants. This Registration Statement also relates to the resale of
these securities by the holders thereof or their transferees.
(4) Represents shares of restricted Common Stock to be registered pursuant to
a certain registration rights agreement.
(5) Represents the average of the bid and asked prices as quoted on Nasdaq on
August 4, 1997. Estimated solely for the purpose of calculating the filing
fee, which fee was paid in connection with the previous filing.
(6) Represents shares of Common Stock underlying warrants issued to a
consultant to the Company and relates to the resale of the shares by the
holder thereof or its transferees.
(7) Represents shares of Common Stock underlying warrants issued to a
financial advisor to the Company and relates to the resale of the shares by
the holder thereof or its transferees.
(8) Represents the average of the bid and asked prices as quoted on Nasdaq on
October 17, 1997, estimated solely for the purpose of calculating the
filing fee.
Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also relates to such additional indeterminate number of shares of
Common Stock as may become issuable by reason of stock splits, dividends
and similar adjustments, in accordance with the antidilution provisions of
the various warrants.
<PAGE>
AID AUTO STORES, INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Under the Securities Act of 1933, as amended
Item in Form S-3 Location in Prospectus
- ---------------- ----------------------
1. Forepart of Registration Statement Outside Front Cover Page
and Outside Front Cover of Prospectus....... of Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside Back
Pages of Prospectus......................... Cover Pages of Prospectus
3. Summary Information, Risk Factors and The Company;
Ratio of Earnings to Fixed Charges.......... The Offering; Risk Factors
4. Use of Proceeds Use of Proceeds............. Use of Proceeds
Outside Front Cover Page
5. Determination of Offering Price............. of Prospectus
6. Dilution ................................... Dilution
7. Selling Security-Holders.................... Selling Stockholders
8. Plan of Distribution........................ Plan of Distribution
9. Description of Securities to be Registered.. Inapplicable
10. Interests of Named Experts and Counsel...... Legal Matters; Experts
Documents Incorporated By
11. Material Changes............................ Reference
12. Incorporation of Certain Information Documents Incorporated By
By Reference................................ Reference
13. Disclosure of Commission Position on
IndemnificationFor Securities Act
Liabilities ................................ Inapplicable
<PAGE>
Subject to Completion, Dated October 22, 1997
AID AUTO STORES, INC.
2,912,596 Shares of Common Stock and
Redeemable Warrants to Purchase
180,000 Shares of Common Stock
________________________
This Prospectus covers up to 2,070,000 shares of common stock, par value $.001
per share ("Common Stock"), of Aid Auto Stores, Inc. (the "Company"), issuable
upon exercise of publicly-traded redeemable warrants of the Company (the
"Warrants"). Each Warrant entitles the registered holder thereof to purchase
one share of Common Stock at a price of $4.00, subject to adjustment in certain
circumstances, at any time through and including April 10, 1998. The Warrants
are redeemable by the Company, upon the consent of Whale Securities Co., L.P.
("Whale"), the underwriter of the Company's initial public offering of
securities in April 1995 (the "Initial Public Offering"), at any time, upon
notice of not less than 30 days, at a price of $.10 per Warrant, provided that
the closing bid quotation of the Common Stock on all 20 trading days ending on
the third day prior to the day on which the Company gives notice has been at
least 150% (currently $6.00, subject to adjustment) of the then effective price
of the Warrants.
This Prospectus also relates to 180,000 shares of Common Stock and 180,000
warrants (the "Whale Warrants") underlying warrants (the "Underwriter's
Warrants") issued to Whale in connection with the Initial Public Offering, as
well as 180,000 shares of Common Stock underlying the Whale Warrants. The
Underwriter's Warrants to purchase Common Stock are exercisable, subject to
adjustment, at $7.90 per share, and the Underwriter's Warrants to purchase the
Whale Warrants are exercisable at $.158 per Warrant. The Whale Warrants are
generally on the same terms as the Warrants, except that the exercise price
is $6.60 per share.
This Prospectus also relates to 157,596 shares of Common Stock issued to
Werner S. Neuburger in connection with the acquisition by the Company of certain
auto parts stores in December 1995 which are being registered herewith pursuant
to the terms of a Registration Rights Agreement, dated December 15, 1995.
This Prospectus also relates to 250,000 shares of Common Stock underlying
warrants issued to Parker Bromley, Ltd. (formerly known as Rockefeller
Securities Group, Inc.) (the "Bromley Warrants"), in connection with a
Consulting Agreement, dated December 12, 1996, between Rockefeller Securities
Group, Inc. and the Company, which shares are being registered for resale
herewith pursuant to the terms of the Consulting Agreement. The Bromley
Warrants are exercisable at $2.3125 per share of Common Stock, subject to
adjustment, through June 11, 1998.
This Prospectus also relates to 75,000 shares of Common Stock underlying
warrants issued to Tradewell Financial Group, LLC, an affiliate of Josephthal
Lyon & Ross Incorporated (the "Josephthal Warrants"), in connection with a
Financial Advisory and Investment Banking Agreement, dated September 12, 1997,
between Josephthal Lyon & Ross Incorporated and the Company, which shares are
being registered for resale herewith pursuant to a Warrant Agreement between
Tradewell Financial Group, LLC and the Company. The Josephthal Warrants are
exercisable at $2.38 per share of Common stock, subject to adjustment, through
September 12, 2002.
The shares of Common Stock issuable upon exercise of the Underwriter's Warrants,
Whale Warrants, Bromley Warrants and Josephthal Warrants may be sold from time
to time by Whale or by its transferees. See "Plan of Distribution."
The Common Stock and Warrants are quoted on the Nasdaq Small-Cap Market
("Nasdaq") under the symbols "AIDA" and "AIDAW," respectively, and listed on
the Boston Stock Exchange under the symbols "AID" and "AIDW", respectively.
On October 17, 1997 the closing sales price of the Common Stock and Warrants,
as reported by Nasdaq, was $2.25 and $.28125, respectively.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS"
COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
In the event all of the Warrants, Underwriter's Warrants, Whale Warrants and
Bromley Warrants are exercised, the proceeds to the Company would be
$11,675,065, before deduction of expenses, including legal, accounting and
miscellaneous expenses payable by the Company, which are estimated to be
$51,000. In addition, a solicitation fee of 5% (up to $414,000) may be payable
to Whale in connection with any solicitation in connection with the Warrants.
See "Use of Proceeds" and "Plan of Distribution".
The date of this Prospectus is _________, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 or from the Commission's
website at http://www.sec.gov, and at the following Regional Offices of the
Commission: Chicago Regional Office, 219 South Dearborn Street, Chicago,
Illinois 60604 and New York Regional Office, 7 World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Common Stock and
Warrants are quoted on the Nasdaq Small Cap Market under the symbols AIDA and
AIDAW, respectively, and on the Boston Stock Exchange under the symbols AID
and AIDW, respectively. Reports and other information concerning the Company
may be inspected at the offices of the Nasdaq Stock Market, Inc., 1735 K Street,
N.W., Washington, D.C. 20006 or the Boston Stock Exchange, Inc., One Boston
Place, Boston, Massachusetts 02105.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference herein:
1. Annual Report on Form 10-K for the year ended December 31, 1996
(Commission File No. 1-13170).
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997 (Commission File No. 1-13170).
3. Registration Statement on Form SB-2 (Registration No. 33-89190),
declared effective by the Commission on April 10, 1995, as amended.
Each document filed by the Company subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and shall be a part hereof from the date of filing for such
document.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the information that
has been incorporated by reference in the Prospectus (not including exhibits
to the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that the Prospectus
incorporates). Requests may be made to Aid Auto Stores, Inc., 275 Grand
Boulevard, P.O. Box 281, Westbury, New York 11590, Attn: Mr. Frank Mangano
(516) 338-7889.
<PAGE>
THE COMPANY
General
Aid Auto Stores, Inc. (the "Company") owns and operates, and franchises, retail
automotive parts and accessories stores under the name Aid Auto Stores. These
stores sell an extensive variety of name-brand automotive parts, accessories and
chemicals, as well as an assortment of products marketed under the "Aid" brand
(the "Aid Mark"), and also under the "Perfect Choice" brand to both do-it-
yourself ("DIY") and commercial customers. At September 30, 1997, there were 22
Company- owned and 29 franchisee-owned Aid Auto Stores. Through 1995, the
Company had derived the majority of its revenues from the wholesale sale of
automotive products to its franchisees and, through its wholly-owned subsidiary,
Ames Automotive Warehouse, Inc. ("Ames"), to hundreds of non-automotive chain
stores and independent jobbers and installers in New York, New Jersey and
Connecticut. However, in 1996, the Company derived approximately 62% of its
operating revenues from its Company-owned retail automotive stores, in contrast
to only 20% in 1995. Aid Auto Stores have operated for more than 40 years and
the Company believes that the Aid Auto name is widely recognized by consumers in
the New York metropolitan area. The Company is seeking to capitalize on such
name recognition, as well as its expertise and operating history, warehouse
distribution channels and vendor relationships, to become the dominant
automotive aftermarket parts distributor and retailer in the Northeast.
The focus of the Company's growth strategy is a Company-owned mini warehouse
Superstore program, which program was instituted in 1995 following the
completion of the Initial Public Offering in April 1995. As of September 30,
1997, the Company has opened eight new Company-owned Superstores. In addition,
on December 15, 1995, the Company acquired ten franchised Aid Auto Stores
located in Long Island, New York. Following the acquisition, the Company
commenced converting up to nine of the ten stores into Aid Auto Superstores.
Five of these stores have been converted and reopened as Superstores, four of
the five remaining stores have, to date, implemented the Superstore advertising,
inventory and merchandising program. Each Superstore enables consumers and
businesses to buy quality automotive products from a large inventory at the
lowest possible prices and to do so in a convenient and informed manner. The
Company intends to continue such growth by means of opening additional Company-
owned Superstores and/or by acquiring other companies, including Aid Auto
franchises, having automotive parts and accessories retail services. The
Company will need to seek additional debt or equity financing to fund the
continuing cost of this program.
The Company was originally formed in New York in 1953 and became a Delaware
corporation in 1971. The Company's executive offices are located at 275 Grand
Boulevard, Westbury, New York 11590 and its telephone number is (516) 338-7889.
Unless the context otherwise requires, all reference to the Company include its
wholly-owned subsidiaries, Aid Flatlands Avenue, Inc., Ames Automotive
Warehouse, Inc., Aid 1715 Flatbush, Inc., White Plains Aid, Inc., Bellmore Aid
Inc., Bethpage Superstore Aid Auto, Inc., North Babylon Superstore Aid Auto,
Inc. and Perfect Choice(TM) Automotive Products, Inc.
<PAGE>
THE OFFERING
Securities Offered:........... 2,070,000 shares of Common Stock issuable upon
exercise of the Warrants; 180,000 shares of
Common Stock(1) and 180,000 Whale Warrants(1)
underlying the Underwriter's Warrants, as well
as 180,000 shares of Common Stock(1) underlying
the 180,000 Whale Warrants; 157,596 shares of
Common Stock owned by Werner S. Neuburger;
250,000 shares of Common Stock underlying the
Bromley Warrants(1) and 75,000 shares of Common
Stock underlying the Josephthal Warrants.(1)
Shares of Common Stock Outstanding
Before Offering........... 3,957,596 (2)
After Offering............ 6,712,596 (2)(3)
Redeemable Warrants.......... Each Warrant entitles the holder thereof to
purchase one share of Common Stock through April
10, 1998 at a price of $4.00, subject to
adjustment in certain circumstances. The Warrants
are subject to redemption by the Company upon the
consent of Whale, at any time upon notice of not
less than 30 days, at a price of $.10 per
Warrant, provided that the closing bid quotation
of the Common Stock on all 20 trading days ending
on the third day prior to the day on which the
Company gives notice has been at least 150%
(currently $6.00, subject to adjustment) of the
then effective exercise price of the Warrants.
The Warrants will be exercisable until the close
of business on the date fixed for redemption.
Whale Warrants............... The Whale Warrants are generally on the same
terms as the Warrants, except that the exercise
price is $6.60 per share.
Bromley Warrants............. The Bromley Warrants entitle the holders thereof
to purchase one share of Common Stock through
June 11, 1998 at a price of $2.3125, subject to
adjustment in certain circumstances. The Bromley
Warrants are not subject to redemption by the
Company.
Josephthal Warrants.......... The Josephthal Warrants entitle the holders
thereof to purchase one share of Common Stock
through September 12, 2002 at a price of $2.38,
subject to adjustment in certain circumstances.
The Josephthal Warrants are not subject to
redemption by the Company.
Estimated Net Proceeds....... $11,215,065. The Company will realize proceeds
upon the exercise of the Warrants registered
hereunder. However, there can be no assurance
that any of the Warrants will be exercised, as
the current market price of the Common Stock is
approximately $2.25 and the exercise prices per
share of the Warrants, the Underwriter's Warrants
to purchase Common Stock and the Whale Warrants
are $4.00, $7.90 and $6.60, respectively.
Use of Proceeds.............. Opening of new Superstores, marketing and
advertising, and working capital and general
corporate purposes. See "Use of Proceeds."
Risk Factors................. Investment in the securities offered hereby
involves a high degree of risk and immediate
substantial dilution and should not be purchased
by investors who cannot afford the loss of their
entire investment. Such risk factors include,
without limitation, the uncertainty of the
Superstore growth strategy, the limited income
from operations in 1996, and losses from
operations in 1995 and the first quarter of 1997,
the need for additional financing and the
significant amount of outstanding indebtedness.
See "Risk Factors" and "Dilution."
NASDAQ Symbols............... Common Stock - AIDA
Warrants - AIDAW
Boston Exchange Symbols...... Common Stock - AID
Warrants - AIDW
_________________
(1) This Prospectus also relates to the resale of these securities by the
holders thereof or their transferees.
(2) Does not include an aggregate of 400,000 shares of Common Stock issuable
under the Company's 1995 Stock Option Plan.
(3) Assumes the exercise of all of the Warrants, Underwriter's Warrants, Whale
Warrants, Bromley Warrants and Josephthal Warrants.
<PAGE>
RISK FACTORS
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be carefully considered in evaluating the Company and its
business.
1. Uncertainty of Superstore Growth Strategy. In April 1995, the Company
completed its Initial Public Offering, allocating a majority of the proceeds
therefrom for implementing its mini warehouse Superstore growth strategy.
Historically, Aid Auto Stores have been predominantly owned and operated by
independent franchisees and the Company has limited experience in operating its
own stores. Prior to the Initial Public Offering, the Company had no experience
in effectuating rapid expansion or in establishing or operating a mini warehouse
Superstore style retail chain. The success of the Superstore growth strategy
will be dependent upon, among other things, market acceptance of the Company's
Superstore concept, the availability of suitable store sites, the timely
development and construction of stores, the ability to hire skilled management
and other personnel, management's ability to successfully manage growth
(including monitoring stores and controlling costs), and the availability of
adequate financing or sufficient cash flow from operations to fund
its future expansion, of which there can be no assurance. The Company's growth
strategy may also be effected by factors not within its control, such as
increased competition, future downturns in the economy, changes in the
automotive market and weather patterns. Moreover, it is possible that the
actual costs in establishing the Superstores or the revenues generated from
their operation will not correspond to the economic models and projections upon
which the Company's Superstore growth program is based. The Company opened its
first Superstore in July 1995, and has since opened seven new Superstores. In
addition, in December 1995 the Company acquired 10 franchised Aid Auto Stores
located in Long Island, New York, and has completed converting five of these
stores into Superstores; four of the remaining stores have, to date, implemented
the Superstore advertising, inventory and merchandising programs. At September
30, 1997, there were 22 Aid Auto Stores owned and operated by the Company and 29
owned and operated by franchisees. There can be no assurance that the Superstore
growth strategy will be successful.
2. Minimal Income/Losses from Operations; Effect of Superstore Growth Program
on Profitability. The Company generated operating revenues of $27,393,678,
$20,263,833 and $24,182,096 during the years ended December 31, 1996, 1995 and
1994, respectively. For 1996, the Company had net income of $30,364. In 1995,
the Company had a net loss of $703,881 and in 1994 it had net income of $19,763.
For the six months ended June 30, 1997, the Company achieved operating revenues
of $12,313,990 and net income of $10,329, as compared to operating revenues of
$13,609,681 and a net income of $92,587 for the six months ended June 30, 1996.
The Company's operating expenses have increased significantly in connection with
the Company's mini warehouse Superstore growth program and, accordingly, the
Company's profitability is dependent on corresponding increases in revenues from
the Superstore operations, of which there can be no assurance. Moreover, future
events, including unanticipated expenses, increased competition, or severe
weather could have an adverse effect on the Company's operating margins and
results of operations. There can be no assurance that the Company's Superstore
growth program will result in an increase in the profitability of the Company's
operations.
3. Need for Additional Financing to Implement Superstore Growth Program. The
Company anticipates, based on currently proposed plans and assumptions relating
to its operations (including the costs associated with, and the timetable for,
its proposed expansion), the Company's working capital, its current loan
facility, together with projected cash flow from operations, will be sufficient
to satisfy its contemplated cash requirements for at least 12 months (including
the contemplated conversion of four of the stores acquired in December 1995 into
Superstores, and the opening of at least three Superstore outlets during that
period). In the event that the Company's cash flow proves to be insufficient
(due to unanticipated expenses, difficulties, problems or otherwise), or the
Company determines to open a greater number of Superstores (including by opening
new stores and/or by acquisitions), the Company will be required to seek
additional financing or curtail such expansion activities. The Company will
need to seek additional debt or equity financing, as the Company does not
anticipate that its current resources and cash flow from operations will be
sufficient to fund the continuing cost of its growth program. To the extent
that the Company seeks financing through the issuance of equity securities, any
such issuance of equity securities would result in dilution to the interests of
the Company's stockholders. Additionally, to the extent that the Company incurs
indebtedness to fund increased levels of accounts receivables or to finance the
acquisition of capital equipment or issues debt securities to fund the
Superstore growth program, the Company will be subject to risks associated with
incurring substantial indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on
any such indebtedness. Other than the Company's existing line of credit, the
Company has no current arrangements with respect to, or sources of, additional
financing, and it is not anticipated that the Company's current majority
stockholder will provide any portion of the Company's future financing
requirements or any further personal guarantees. There can be no assurance that
any additional financing will be available to the Company on commercially
reasonable terms, or at all.
4. Impact of Superstores on Franchisees. More recent franchise agreements,
with respect to 10 of the existing franchised Aid Auto Stores, contain a
provision granting the franchisee an exclusive territory of a radius of 1.5
miles from its location, in consideration of the franchisee purchasing annually
at least 75% of its inventory from the Company. In 1995 and 1996, none of these
franchisees purchased inventory from the Company at such level. Thus, the
Company believes that upon notice and failure by the franchisee to cure within
the appropriate time period, it will be able to terminate such territorial
exclusivity. The Company has not yet given such notice to any franchisee.
Notwithstanding the foregoing, the Company intends to select sites for its
Superstores in areas that are not served by existing Aid Auto Stores. However,
it is possible that the opening of a cluster of Superstores in a target market
may reduce the business of existing franchised Aid Auto Stores. While the
Company believes that the opening of its Superstores will not violate its
franchise agreements or any other laws or regulations, there can be no assurance
that an independent franchisee whose business is adversely effected by the
Superstore program would not seek to litigate its claims, the defense of which
could become costly for the Company and the outcome of which is uncertain.
5. Significant Outstanding Demand and Other Indebtedness. The Company's
operations have been funded in part by the incurrence of significant
indebtedness. On September 30, 1997, the Company entered into a $10,000,000
revolving credit facility with Foothill Capital Corporation ("Foothill"),
which, at the Company's option, can be increased to $15,000,000. Prior to
September 30, 1997, the Company had a $10,000,000 line of credit with General
Electric Capital Corp. ("GE Capital"). Of the Company's total indebtedness of
$12,239,480 outstanding at June 30, 1997, an aggregate of $7,954,369 was
outstanding under the GE Capital line of credit, $1,280,489 was outstanding
and evidenced by a promissory note issued in connection with the purchase of
10 Long Island franchised stores, $817,122 was outstanding and evidenced by
miscellaneous promissory notes and capital leases and $2,187,500 was outstanding
under a promissory note to Philip L. Stephen, Chairman of the Board, Chief
Executive Officer and President of the Company. Substantially all of the
Company's assets are pledged to Foothill as collateral under the line of credit,
and the Company, subject to certain exceptions, is limited or prohibited from
merging or consolidating with another corporation or selling all or
substantially all of its assets. The Company has used the Foothill line of
credit to pay all of its obligations to GE Capital in full. This amount
totalled $7,610,639 and included a prepayment penalty of $175,000. The
$1,507,396 promissory note issued in connection with the Long Island
acquisition, which had an outstanding balance of $1,280,489 at June 30, 1997,
is for a period of 10 years, is subordinate to the Company's Foothill
indebtedness, and bears interest at the prime rate. The Company's obligation
to Mr. Stephen is evidenced by a promissory note, which is subordinated to the
Foothill indebtedness. The note bears interest at the same rate as charged by
Foothill, payable monthly, with principal payable in quarterly installments
through February 1, 2000. The Foothill indebtedness allows the Company to make
quarterly principal payments and monthly interest payments so long as prior to
and after giving effect to such payments no default has occurred or is
continuing or would occur on the Foothill Indebtedness as a result thereof. The
note provides for immediate payment thereof upon, among other things, a change
in a majority of the continuing directors of the Company (as defined in the
note) or a demand by Foothill of payment in full of outstanding Foothill
indebtedness.
6. Competition. The Company competes in both the DIY and commercial portions
of the automotive aftermarket business. Within its current market (the New York
metropolitan area), the largest share of the DIY market is held by independently
owned stores which, while principally selling to wholesale accounts, have
significant DIY sales. The Company also competes with other automotive specialty
retailing chains such as R&S Strauss, and in certain of its product categories
(such as oil and certain car care products) with discount and general
merchandise stores. The Company's major competitors in supplying the
commercial market include independent warehouse distributors and independently
owned parts stores, automobile dealerships and national warehouse distributors
and associations such as National Automotive Parts Association (NAPA). The
Company may also face competition from large regional automotive aftermarket
chains based in other areas of the country, in the event that they enter the
Company's market, such as Pep Boys which has recently entered the New York
market and opened several stores. Competitors such as R&S Strauss, NAPA and
Pep Boys, and some potential competitors, are larger than the Company and have
greater financial, marketing, personnel and other resources than the Company.
7. Dependence on Suppliers. The Company is dependent on close relationships
with its suppliers of automotive parts and equipment, and its ability to
purchase products directly from these manufacturers at favorable prices and
on favorable terms. The Company views its relationships with its suppliers as
excellent, and believes that alternative sources exist for most of the products
it purchases. However, the Company does not maintain supply contracts with any
of its suppliers, and it is possible that the loss of any significant supplier
could have a material adverse effect on the Company if not replaced in a timely
manner and upon suitable terms. The Company's principal suppliers currently
provide the Company with certain incentives such as volume purchasing discounts
and cooperative advertising and market development funds, which incentive
amounts generally range from between 5% and 10% of the listed purchase prices.
A reduction or discontinuance of these incentives could also have a material
adverse effect on the Company and its operations.
8. Dependence on Management and Key Personnel. The Company is dependent
upon the services of its senior executives, particularly Philip L. Stephen, who
is Chairman of the Board, President and Chief Executive Officer of the Company.
Although the Company has obtained a key-man life insurance policy on the life of
Mr. Stephen in the amount of $2,000,000 and has entered into an employment
contract with Mr. Stephen which expires in April 1998, the loss of his services
could have a material adverse impact on the Company. Also, the Company's
successful growth will depend upon, among other things, the successful
recruiting of other qualified Superstore personnel. There can be no assurance
that the Company will be able to retain existing employees or that it will be
able to find and retain the other personnel it requires on acceptable terms.
9. Impact of Seasonality. The Company's business is seasonal primarily as a
result of the impact of weather conditions on store sales. Store sales and
profits have historically been higher in the second and third quarters (April
through September) of each year than in the first and fourth quarters, for which
the Company generally achieves only nominal profits or incurs net losses.
Weather extremes tend to enhance sales by causing a higher incidence of parts
failure and increasing sales of seasonal products. However, extremely severe
winter weather or rainy conditions tend to reduce sales by causing deferral
of elective maintenance.
10. Control by Management. Mr. Philip L. Stephen, Chairman of the Board,
President and Chief Executive Officer of the Company, owns approximately 50.5%
of the currently issued and outstanding Common Stock. Accordingly, Mr. Stephen
is in a position to control the Company, including the election of all or a
majority of the directors of the Company. Even if some or all of the securities
offered hereby are issued, Mr. Stephen would likely maintain effective control
of the Company.
11. Government Regulation. The Company is subject to federal and state laws,
rules and regulations that govern the offer and sale of franchises. To offer and
sell franchises, the Company is required by the United States Federal Trade
Commission to furnish to prospective franchisees a current franchise offering
disclosure document. The Company uses a Uniform Franchise Offering Circular
("UFOC") to satisfy this disclosure obligation, which is delivered to each
prospective franchisee in its current franchise markets (New York and New
Jersey). In addition, the Company is required to register and file a UFOC with
the appropriate New York State authority. The Company periodically updates its
UFOC to include information about new officers and directors, recent financial
information and other material events. In addition to New York, other states
require registration, special prescribed disclosure or other compliance before
the Company could offer franchises in those jurisdictions. However, the Company
has no current plans to offer franchises in any states other than New York and
New Jersey, if at all.
12. Immediate and Substantial Dilution. The sale of the shares offered hereby
involves an immediate and substantial dilution between the pro forma net
tangible book value per share before and after the offering and the exercise
of the Warrants, the Underwriter's Warrants and the Whale Warrants.
13. No Dividends. The Company has never paid cash dividends on its Common
Stock and does not expect to pay cash dividends in the foreseeable future.
14. Shares Eligible for Future Sale; Registration Rights. The Company
currently has 3,957,596 shares of Common Stock outstanding. Of such shares,
2,157,596 are deemed to be "restricted securities," as that term is defined
under Rule 144 promulgated under the Securities Act, all which may be sold at
any time without registration pursuant to such rule. No prediction can be made
as to the effect, if any, that the sale of such shares of Common Stock or even
the availability of such shares for sale will have on the market prices
prevailing from time to time. The possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
market prices for the Common Stock or the Warrants and could impair the
Company's ability to raise capital through the sale of its equity securities.
15. Possible Inability to Exercise Warrants. Although certain exemptions in
the securities laws of certain states might permit Warrants to be transferred to
purchasers in states other than those in which the Warrants were initially
qualified, the Company will be prevented from issuing Common Stock in such
other states upon the exercise of the Warrants unless an exemption from
qualification is available or unless the issuance of Common Stock upon exercise
of the Warrants is qualified. The Company is under no obligation to seek, and
may decide not to seek or may not be able to obtain, qualification of the
issuance of such Common Stock in all of the states in which the ultimate
purchasers of the Warrants reside. In such a case, the Warrants held will
expire and have no value if such Warrants cannot be sold. Accordingly, the
market for the Warrants may be limited because of these restrictions. Further,
a current prospectus covering the Common Stock issuable upon exercise of the
Warrants must be in effect before the Company may accept Warrant exercises.
Although the Company has committed to use its best efforts to do so, there
can be no assurance that the Company will be able to maintain an appropriate
prospectus in effect.
16. Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company, upon the consent of Whale, at any time upon notice of
not less than 30 days, at a price of $.10 per Warrant, provided the closing bid
quotation of the Common Stock on all 20 trading days ending on the third day
prior to the day on which the Company gives notice has been at least 150%
(currently $6.00) of the then effective exercise price of the Warrants.
Redemption of the Warrants could force the holders to exercise the Warrants
and pay the exercise price at a time when it may be disadvantageous for the
holders to do so, to sell the Warrants at the then current market price when
they might otherwise wish to hold the Warrants or to accept the redemption
price, which is likely to be substantially less than the market value of the
Warrants at the time of redemption.
17. Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of 2,000,000
shares of "blank check" preferred stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Company's Common Stock. In the event of issuance, the preferred
stock could be utilized, under certain circumstances, as a method of
discouraging, delaying or preventing a change in control of the Company.
Although the Company has no present intention to issue any shares of its
preferred stock, there can be no assurance that the Company will not do so in
the future.
18. Possible Delisting of Securities from Nasdaq System; Risks Associated with
Low-Priced Stocks. The Company's Common Stock is listed on the NASDAQ
System. To remain listed with NASDAQ, companies are required to have not less
than $2,000,000 in total assets and $1,000,000 in capital and surplus, which
requirements may be raised in the near future. In addition, NASDAQ now requires
that all listed companies maintain a per share trading price of $1.00. In the
event a company's price per share trades below $1.00 for 30 consecutive days,
it has 90 days in which it must trade above $1.00 per share for 10 consecutive
days or else it will be subject to delisting procedures. As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of the Company's securities. In
addition, if the Common Stock was to become delisted from trading on Nasdaq
and the trading price of the Common Stock were to fall below $5.00 per share,
trading in the Common Stock would also be subject to the requirements of certain
rules promulgated under the Securities Exchange Act of 1934, as amended, which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock (generally, any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and
the risks associated therewith, and impose various sales practice requirements
on broker-dealers who sell penny stocks to persons other than established
customers and accredited investors (generally institutions). For these types
of transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers
by such requirements may discourage them from effecting transactions in the
Common Stock and Warrants, which could severely limit the liquidity of the
Common Stock and Warrants and the ability of purchasers in this offering to
sell the Common Stock and Warrants in the secondary market.
19. Risks Associated with Forward-Looking Statements Included in this
Prospectus. This Prospectus contains certain forward-looking statements
regarding, among other items, the Company's expansion strategy. The forward-
looking statements included herein are based on current expectations that
involve numerous risks and uncertainties. Assumptions relating to the foregoing
involve judgments with respect to, among other things, the Company's future
growth and profitability, the ability of the Company to open new retail stores
and integrate acquisitions and the effects of general economic conditions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that its
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Prospectus will prove to
be accurate. In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such information should not
be regarded as a representation by the Company or any other person that the
bjectives and plans of the Company will be achieved.
<PAGE>
USE OF PROCEEDS
In the event that all of the Warrants, Underwriter's Warrants, Whale Warrants,
Bromley Warrants and Josephthal Warrants are exercised, the net proceeds to the
Company pursuant to the offering hereby are estimated at approximately
$11,210,065, after deducting the maximum potential solicitation fee (5%)
payable to Whale ($414,000) and other expenses estimated at $51,000. However,
there can be no assurance that any Warrants will be exercised, as the current
market value of the Common Stock is significantly less than the exercise prices
of the Warrants, Underwriter's Warrants and Whale Warrants. Such net proceeds,
if any, are expected to be expended for the opening of new Superstores,
marketing and advertising and working capital and general corporate purposes,
approximately as follows:
Approximate
Approximate Percentage of
Application of Proceeds Dollar Amount Net Proceeds
- ----------------------- ------------- -------------
Opening of new Superstores (1) ........ $9,000,000 80.3%
Marketing and advertising.............. 750,000 6.7%
Working capital and general corporate
purposes............................. 1,460,065 13.0%
------------ ------
Total.......................... $ 11,210,065 100.0%
============ ======
- --------------------------------------
(1) Represents the estimated costs associated with the opening of approximately
20 new Superstore outlets. Superstore sites may be newly leased or
subleased depending on whether the Company is acquiring and constructing
on empty space, or acquiring and expanding upon the business and assuming
the lease of an existing independent automotive parts store or franchised
Aid Auto Store. The Company believes that the cost to open each Superstore
will average approximately $450,000, including site selection costs, lease
deposits, leasehold improvements or construction costs, acquisition of
furniture, fixtures and equipment, opening inventory, and other
miscellaneous pre-opening expenses (including salaries, training, promotion
and advertising). The Company believes that the opening costs will be
approximately the same in the case of a purchase and expansion of an
existing store's business. However, all estimates are subject to
significant variation.
The foregoing represents the Company's estimate of its use of the net proceeds
of this offering based on current planning and business, industry and economic
conditions, and the Company's future revenues and expenditures. The proposed
application of the net proceeds is subject to changes as market and financial
conditions and other opportunities that may be presented to the Company may
dictate. The costs required to open the Company's Superstores may vary
depending upon such factors as the actual selling space, the amount of rent and
security that must be paid in advance (and, in some cases, the purchase price of
an existing store's business), and the extent of construction costs and
leasehold improvements required to be paid by the Company. Accordingly, in the
event the Company's estimates as to the costs required to open and operate
stores prove to be inaccurate, the Company may reduce the number of Superstores
it proposes to open and/or utilize working capital in addition to the net
proceeds of this offering allocated for the store openings.
In the event less than the maximum proceeds are raised, the Company intends to
allocate the proceeds to the same uses in the approximate same proportions as if
the maximum proceeds were raised.
To the extent that the net proceeds are not immediately required for the
purposes described above, they may be invested principally in either U.S.
government securities, short-term certificates of deposit, money market funds or
other short-term interest-bearing investments. The Company may also use a
substantial portion of these proceeds to temporarily reduce the balance
outstanding under the Company's institutional line of credit.
The Company will not receive any of the proceeds from the sale of the Common
Stock by the holders of the Common Stock or by the holders who have exercised
their warrants.
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the present record and beneficial ownership of
securities of the Company owned by the Selling Security Holders as of September
15, 1997.
Percentage
Percentage of of
Outstanding Securities Outstanding
Securities Shares Owned Securities Owned Shares
Name of Selling Owned Prior Before to be Sold After Owned After
Security Holder to Offering Offering in Offering Offering Offering
- ----------------- ----------- ----------- ----------- -------- -----------
Whale Securities
Co., L.P. 180,000 (1) 4.4% 180,000 0 0
Whale Securities
Co., L.P. 360,000 (2) 8.3% 360,000 0 0
Werner S.
Neuburger 157,596 4.0% 157,596 0 0
Parker Bromley,
Ltd. 250,000 (3) 5.9% 250,000 0 0
Tradewell Financial
Group, LLC 75,000 (4) 1.9% 75,000 0 0
__________________
(1) Represents the Whale Warrants.
(2) Represents 360,000 shares of Common Stock underlying the Underwriter's
Warrant and the Whale Warrants. These securities are held in Whale's name
for the account of certain employees and equity owners of Whale.
(3) Represents shares of Common Stock underlying the Bromley Warrants.
(4) Represents shares of Common Stock underlying the Josephthal Warrants.
The Selling Security Holders will be entitled to receive all of the proceeds
from the future sale of their shares of Common Stock. The Company will not
receive any proceeds from the future sale of any of the aforementioned shares
by their respective holders.
<PAGE>
PLAN OF DISTRIBUTION
Of the securities covered by this Prospectus, 180,000 shares of Common Stock and
180,000 Whale Warrants are issuable upon exercise of the Underwriter's Warrants,
250,000 shares of Common Stock are issuable upon exercise of the Bromley
Warrants, 75,000 shares of Common Stock issuable upon exercise of the Josephthal
Warrants, 2,070,000 shares are issuable upon exercise of the Warrants, and
180,000 are issuable upon exercise of the Whale Warrants. This Prospectus
also covers the resale by the holders of the securities underlying the
Underwriter's Warrant, Whale Warrants, Bromley Warrants and Josephthal Warrants.
From time to time, one or more of the Selling Stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares of
Common Stock, Underwriter's Warrant, Whale Warrants, Bromley Warrants or
Josephthal Warrants, and the pledgees, secured parties or persons to whom such
shares have been hypothecated shall, upon foreclosure in the event of default,
be deemed to be Selling Stockholders for purposes hereof.
The shares of Common Stock and the Whale Warrants underlying the Underwriter's
Warrant, the shares of Common Stock owned by Werner S. Neuburger, and the
shares of Common Stock underlying the Bromley Warrants, Josephthal Warrants
and Whale Warrants, may be offered for the account of the holder or holders from
time to time, as market conditions permit on Nasdaq, or, on the Boston Stock
Exchange, or otherwise, through ordinary brokerage transactions, in negotiated
transactions, at fixed prices which may be changed, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, or at
negotiated prices. The holders may effect such transactions by selling shares
to or through broker-dealers, and all such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
holders and/or the purchasers of the securities for whom such broker-dealers may
act as agent or to whom they sell as principal, or both (which compensation as
to a particular broker-dealer might be in excess of customary commissions). The
aforementioned methods of sale described above may not be all-inclusive.
Any broker-dealer acquiring securities in the over-the-counter market from the
holders may sell the securities either directly, in its normal market-making
activities, through or to other brokers on a principal or agency basis or to
its customers. Any such sales may be at prices then prevailing in the over-
the-counter market, at prices related to such prevailing market prices or at
negotiated prices to its customers or a combination of such methods. Such
broker-dealers that act in connection with the sale of the shares hereunder
might be deemed to be "underwriters" within the meaning of Section 2(11) of
the Securities Act of 1933, as amended (the "Securities Act"); any commissions
received by them and any profit on the resale of shares as principal might be
deemed to be underwriting discounts and commissions under the Securities Act.
Any such commissions, as well as other expenses of the holders and applicable
transfer taxes, are payable by such parties, as the case may be.
The Company will pay to Whale a fee of 5% of the exercise price of each Warrant
exercised provided however, that Whale will not be entitled to receive such
compensation if (i) the market price of the Company's Common Stock on the date
the Warrant is exercised is lower than the then Warrant exercise price; (ii) the
Warrant was held in a discretionary account; (iii) disclosure of compensation
arrangements was not made at the time of the exercise of the Warrant; (iv) the
holder of the Warrants has not confirmed in writing that Whale solicited such
exercise, or (v) the solicitation of exercise of the Warrants was in violation
of Regulation M promulgated under the Exchange Act. There are no understandings
or agreements between the Company and Whale relating to the solicitation of the
Warrants by Whale.
Pursuant to the Underwriting Agreement entered into by the Company and Whale in
connection with the Company's Initial Public Offering in April 1995, the Company
has agreed to indemnify Whale against certain liabilities, including liabilities
under the Securities Act.
<PAGE>
LEGAL MATTERS
Legal matters in connection with the securities offered hereby will be passed
upon for the Company by Breslow & Walker, LLP, 767 Third Avenue, New York,
New York 10017.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1995 and
1996 and for the years ended December 31, 1994, 1995 and 1996, are incorporated
in this Registration Statement in reliance upon the reports of Grant Thornton,
LLP, independent certified public accountants, upon the authority of said firm
as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C., a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, for the registration of the securities
offered hereby. This Prospectus, which is part of the Registration Statement,
does not contain all of the information contained in the Registration Statement.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, which may be inspected, without charge, at the Office of the Securities
and Exchange Commission, or copies of which may be obtained from the Commission
in Washington, D.C., upon payment of the requisite fees, or from the
Commission's website at http://www.sec.gov. Statements contained in this
Prospectus as to the content of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
<PAGE>
=========================================== =============================
No dealer, salesperson, or other person has
been authorized in connection with this
offering to give any information or to make
any representations other than those
contained in this Prospectus. This
Prospectus does not constitute an offer or a
solicitation in any jurisdiction to anyone to AID AUTO STORES, INC.
whom it is unlawful to make such offer or
solicitation. Neither the delivery of this
Prospectus, nor any sale made hereunder
shall, under any circumstances, create an
implication that there has been no change in
the circumstances or the facts herein set
forth since the date hereof.
___________________________ 2,912,596 shares of Common
Stock and Redeemable
Warrants to Purchase
180,000 shares of Common
Stock.
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . 2
Documents Incorporated by Reference 2
The Company . . . . . . . . . . . . . . . 3
The Offering. . . . . . . . . . . . . . . 4 ============
Risk Factors. . . . . . . . . . . . . . . 5 PROSPECTUS
Use of Proceeds . . . . . . . . . . . . . 11 ============
Dilution. . . . . . . . . . . . . . . . . 13
Selling Security Holders. . . . . . . . . 14
Plan of Distribution. . . . . . . . . . . 15
Legal Matters . . . . . . . . . . . . . . 16
Experts . . . . . . . . . . . . . . . . . 16
Additional Information. . . . . . . . . . 16
___________, 1997
========================================== ===============================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses of the Registrant in connection with the issuance
and distribution of the securities being registered hereby are as follows:
Accounting Fees and Expenses. . . . . . . . . . . . . . . . . $ 7,500
Legal fees and expenses . . . . . . . . . . . . . . . . . . . 25,000
Blue Sky filing fees and expenses . . . . . . . . . . . . . . 10,000
Solicitation fee (1). . . . . . . . . . . . . . . . . . . . . 414,000
Miscellaneous Expenses. . . . . . . . . . . . . . . . . . . . 8,500
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . $465,000
========
________________________
(1) Represents potential maximum solicitation fee which may be paid to Whale.
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law the registrant
may or shall, subject to various exceptions and limitations, indemnify its
directors or officers and may purchase and maintain insurance therefor.
The Company has included in its Certificate of Incorporation pursuant to
Section 102(b)(7) of the Delaware General Corporation Law a provision
eliminating the personal liability of directors to the Company or its
stockholders for damages for breach of fiduciary duty. The principal effect
of this provision in the Company's Certificate of Incorporation is to eliminate
potential monetary damage actions against any director for breach of his duties
as a director except (a) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware General Corporation Law, which relates to a willful
or negligent violation of Section 160 (regarding the illegal purchase or
redemption of stock by a corporation) or Section 173 (regarding a corporations
illegal declaration or payment of dividends) of the Delaware General Corporation
Law, or (d) for any transaction from which the director derived an improper
benefit. This provision does not affect the liability of any director for
acts or omissions occurring prior to the date of adoption of this provision.
In addition, Section 145 of the Delaware General Corporation Law empowers a
corporation (a) to grant indemnification to any officer or director where it
is determined that he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful and (b) to advance to an officer or director the
expenses of defending claims upon receipt of his undertaking to repay any amount
to which it is later determined he is not entitled. The Company's By-Laws
provide that the Company will indemnify and advance expenses of defense to its
officers and directors substantially to the full extent authorized by the
Delaware General Corporation Law.
The foregoing statement is subject to the detailed provisions of Sections
102 and 145 of the Delaware General Corporation Law.
Item 16. Exhibits
Exhibit
Number Documents
------- ---------
4(a) Form of Warrant*
4(b) Form of Underwriter's Warrant*
4(c) Form of Whale Warrant*
4(d) Form of Bromley Warrant**
4(e) Form of Josephthal Warrant
5 Opinion of Counsel
10 Loan and Security Agreement between the Company
and Foothill Capital Corporation, dated as of
September 29, 1997.
23(a) Independent Auditors' Consent
23(b) Consent of Counsel is contained in the Opinion of
Counsel, filed as part hereof as Exhibit 5.
___________________
* Previously filed with the Company's Registration Statement on Form SB-2
(No. 33-89190) declared effective by the Commission on April 10, 1995.
** Previously filed with the Company's Registration Statement on Form S-3
(No. 333-33181), filed August 8, 1997.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
the Registration Statement to (i) include any prospectus required by Section
10(a)(3) of the Securities Act, (ii) reflect in the prospectus any facts or
events which, individually or together, represent a fundamental change in the
information in the Registration Statement, and (iii) include any material
information with respect to the plan of distribution not previously disclosed
in this Registration Statement or any material change to such information in
this Registration Statement; (2) that, for the purpose of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (3) to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by final adjudication of
such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the Town of
Hempstead, State of New York, on October 22, 1997.
AID AUTO STORES, INC.
By: /s/ Philip L. Stephen
-----------------------------
Philip L. Stephen,
President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/ Frank Mangano
----------------------------
Frank Mangano, Chief Financial
Officer
(Principal Financial and
Accounting Officer)
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Philip L. Stephen Director October 22, 1997
- ----------------------------
Philip L. Stephen
/s/ Greg M. Stephen Director October 22, 1997
- ---------------------------
Greg M. Stephen
/s/ Lewis R. Cowan Director Ocotber 22, 1997
- ---------------------------
Lewis R. Cowan
___________________________ Director ________ __, 1997
Ira Scott Greenspan
/s/ Leonard Genovese Director October 22, 1997
- ---------------------------
Leonard Genovese
/s/ Werner S. Neuburger Director October 22, 1997
- ---------------------------
Werner S. Neuburger
<PAGE>
Exhibit 4(e)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY
TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M. NEW YORK TIME, SEPTEMBER 12, 2002
NO. W-______ 75,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Tradewell Financial Group, LLC, or
registered assigns, is the registered holder of 75,000 Warrants to purchase
initially at any time from September 12, 1997 until 5:30 p. m. New York time
on September 12, 2002 (the "Expiration Date"), up to 75,000 fully-paid and
non-assessable shares of common stock, $.001 par value per share ("Common
Stock"), of AID AUTO STORES, INC. a Delaware corporation (the "Company"), at
the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $2.38 per share of Common Stock upon surrender of this
Warrant Certificate and payment of the applicable Exercise Price at an office
or agency of the Company, or due exercise of Section 3.2 of the Warrant
Agreement (as hereafter defined), but subject to the conditions set forth
herein and in the Investment Banking Agreement dated as of September 12, 1997
between the Company and Josephthal Lyon & Ross Incorporated (the "Warrant
Agreement"). Payment of the applicable Exercise Price shall be made by certified
or official bank check in New York Clearing House funds payable to the order of
the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference herein and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events,
the then applicable Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the then applicable Exercise
Price and the number and/or type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company to issue such
new Warrant Certificates shall not in any way change, alter, or otherwise
impair, the rights of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of September 12, 1997
AID AUTO STORES, INC.
[SEAL] By: ______________________
Name:
Title:
Attest:
______________________________
, Secretary
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase: ,
/_/ shares of Common Stock;
CHECK APPROPRIATE BOX
and herewith tenders in payment for such securities a certified or official bank
check payable in New York Clearing House Funds to the order of ____________,INC.
in the amount of $_____________, all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in
the name of ________________________ whose address is _____________________ and
that such Certificate be delivered to ____________________ whose address
is______________________.
Dated:
Signature ___________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and hereby irrevocably constitutes and appoints _____________ Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
Signature:___________________________
(Signature must confirm in all respects to name of holder
as specified on the face of the Warrant Certificate.)
(Insert Social Security or Other Identifying Number of Assignee).
<PAGE>
Exhibit 5
BRESLOW & WALKER, LLP
767 Third Avenue
New York, New York 10017
October 22, 1997
Board of Directors
Aid Auto Stores, Inc.
275 Grand Avenue
Westbury, New York 11590
Gentlemen:
It is our opinion that the securities being registered with the Securities
and Exchange Commission pursuant to the Registration Statement of Aid Auto
Stores, Inc. on Amendment No. 1 to Form S-3 will, when sold, be legally issued,
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement and further consent to the reference made to us under the
caption "Legal Matters" in the Prospectus constituting part of such Registration
Statement.
Very truly yours,
/s/Breslow & Walker, LLP
Breslow & Walker, LLP
<PAGE>
Exhibit 10
===========================================================
LOAN AND SECURITY AGREEMENT
by and between
Aid Auto Stores, Inc. and Ames Automotive Warehouse, Inc.
and
FOOTHILL CAPITAL CORPORATION
Dated as of September 29, 1997
========================================================
TABLE OF CONTENTS
-----------------
Page(s)
-------
1. DEFINITIONS AND CONSTRUCTION.. . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . 16
1.3 Code. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
1.4 Construction. . . . . . . . . . . . . . . . . . . . . . . . 16
1.5 Schedules and Exhibits. . . . . . . . . . . . . . . . . . . 17
2. LOAN AND TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . 17
2.1 Revolving Advances. . . . . . . . . . . . . . . . . . . . . 17
2.2 Intentionally Deleted.. . . . . . . . . . . . . . . . . . . 20
2.3 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.4 Intentionally Deleted . . . . . . . . . . . . . . . . . . . 21
2.5 Overadvances. . . . . . . . . . . . . . . . . . . . . . . . 21
2.6 Interest Rates, Payments, and Calculations. . . . . . . . . 21
2.7 Collection of Accounts. . . . . . . . . . . . . . . . . . . 22
2.8 Crediting Payments; Application of Collections. . . . . . . 22
2.9 Designated Account. . . . . . . . . . . . . . . . . . . . . 23
2.10 Maintenance of Loan Account; Statements of Obligations. . . 23
2.11 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3. CONDITIONS; TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . 24
3.1 Conditions Precedent to the Initial Advance and the Term
Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2 Conditions Precedent to all Advances and the Term Loan. . . 26
3.3 Condition Subsequent. . . . . . . . . . . . . . . . . . . . 27
3.4 Term; Automatic Renewal.. . . . . . . . . . . . . . . . . . 28
3.5 Effect of Termination.. . . . . . . . . . . . . . . . . . . 28
3.6 Early Termination by Borrower.. . . . . . . . . . . . . . . 28
3.7 Termination Upon Event of Default.. . . . . . . . . . . . . 29
4. CREATION OF SECURITY INTEREST. . . . . . . . . . . . . . . . . . . 29
4.1 Grant of Security Interest. . . . . . . . . . . . . . . . . 29
4.2 Negotiable Collateral.. . . . . . . . . . . . . . . . . . . 29
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 29
4.4 Delivery of Additional Documentation Required.. . . . . . . 29
4.5 Power of Attorney.. . . . . . . . . . . . . . . . . . . . . 30
4.6 Right to Inspect. . . . . . . . . . . . . . . . . . . . . . 30
5. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . . . . . . . . . . 31
5.1 No Encumbrances.. . . . . . . . . . . . . . . . . . . . . . 31
5.2 Eligible Accounts.. . . . . . . . . . . . . . . . . . . . . 31
5.3 Eligible Inventory. . . . . . . . . . . . . . . . . . . . . 31
5.4 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.5 Location of Inventory and Equipment.. . . . . . . . . . . . 31
5.6 Inventory Records.. . . . . . . . . . . . . . . . . . . . . 31
5.7 Location of Chief Executive Office; FEIN. . . . . . . . . . 31
5.8 Due Organization and Qualification; Subsidiaries. . . . . . 32
5.9 Due Authorization; No Conflict. . . . . . . . . . . . . . . 32
5.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11 No Material Adverse Change. . . . . . . . . . . . . . . . . 33
5.12 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . 34
5.14 Environmental Condition.. . . . . . . . . . . . . . . . . . 34
5.15 Franchisees.. . . . . . . . . . . . . . . . . . . . . . . . 34
5.16 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 34
5.17 Borrower Execution of Financing Statements. . . . . . . . . 36
6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Accounting System.. . . . . . . . . . . . . . . . . . . . . 37
6.2 Collateral Reporting. . . . . . . . . . . . . . . . . . . . 37
6.3 Financial Statements, Reports, Certificates.. . . . . . . . 38
6.4 Tax Returns.. . . . . . . . . . . . . . . . . . . . . . . . 39
6.5 Intentionally Deleted.. . . . . . . . . . . . . . . . . . . 39
6.6 Returns.. . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.7 Title to Equipment. . . . . . . . . . . . . . . . . . . . . 40
6.8 Maintenance of Equipment. . . . . . . . . . . . . . . . . . 40
6.9 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.10 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . 40
6.11 No Setoffs or Counterclaims.. . . . . . . . . . . . . . . . 42
6.12 Location of Inventory and Equipment.. . . . . . . . . . . . 42
6.13 Compliance with Laws.. . . . . . . . . . . . . . . . . . . . 42
6.14 Employee Benefits.. . . . . . . . . . . . . . . . . . . . . 43
6.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . 44
7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 44
7.2 Liens.. . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.3 Restrictions on Fundamental Changes.. . . . . . . . . . . . 44
7.4 Disposal of Assets. . . . . . . . . . . . . . . . . . . . . 45
7.5 Change Name.. . . . . . . . . . . . . . . . . . . . . . . . 45
7.6 Guarantee.. . . . . . . . . . . . . . . . . . . . . . . . . 45
7.7 Nature of Business. . . . . . . . . . . . . . . . . . . . . 45
7.8 Prepayments and Amendments. . . . . . . . . . . . . . . . . 45
7.9 Change of Control.. . . . . . . . . . . . . . . . . . . . . 45
7.10 Consignments. . . . . . . . . . . . . . . . . . . . . . . . 45
7.11 Distributions.. . . . . . . . . . . . . . . . . . . . . . . 45
7.12 Accounting Methods. . . . . . . . . . . . . . . . . . . . . 46
7.13 Investments.. . . . . . . . . . . . . . . . . . . . . . . . 46
7.14 Transactions with Affiliates. . . . . . . . . . . . . . . . 46
7.15 Suspension. . . . . . . . . . . . . . . . . . . . . . . . . 46
7.16 Intentionally Deleted. . . . . . . . . . . . . . . . . . . . 46
7.17 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 46
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. . . . . . . . . . . . . . . . . . . 46
7.19 No Prohibited Transactions Under ERISA. . . . . . . . . . . 46
7.20 Financial Covenants.. . . . . . . . . . . . . . . . . . . . 47
7.21 Capital Expenditures. . . . . . . . . . . . . . . . . . . . 48
8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 48
9. FOOTHILL'S RIGHTS AND REMEDIES.. . . . . . . . . . . . . . . . . . 50
9.1 Rights and Remedies.. . . . . . . . . . . . . . . . . . . . 50
9.2 Remedies Cumulative.. . . . . . . . . . . . . . . . . . . . 53
10. TAXES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . 53
11. WAIVERS; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 54
11.1 Demand; Protest; etc. . . . . . . . . . . . . . . . . . . . 54
11.2 Foothill's Liability for Collateral.. . . . . . . . . . . . 54
11.3 Indemnification.. . . . . . . . . . . . . . . . . . . . . . 54
12. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.. . . . . . . . . . . . 56
14. DESTRUCTION OF BORROWER'S DOCUMENTS. . . . . . . . . . . . . . . . 56
15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 56
15.1 Effectiveness.. . . . . . . . . . . . . . . . . . . . . . . 56
15.2 Successors and Assigns. . . . . . . . . . . . . . . . . . . 57
15.3 Section Headings. . . . . . . . . . . . . . . . . . . . . . 57
15.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . 57
15.5 Severability of Provisions. . . . . . . . . . . . . . . . . 57
15.6 Amendments in Writing.. . . . . . . . . . . . . . . . . . . 57
15.7 Counterparts; Telefacsimile Execution.. . . . . . . . . . . 57
15.8 Revival and Reinstatement of Obligations. . . . . . . . . . 58
15.9 Integration.. . . . . . . . . . . . . . . . . . . . . . . . 58
SCHEDULES AND EXHIBITS
----------------------
Schedules E-1 & 6.12 Eligible Inventory Locations
and Locations of Inventory and Equipment
Schedule P-1 Permitted Liens
Schedule R-1 Real Property Collateral
Schedule 5.8 Direct and Indirect Subsidiaries
and Securities Convertible into
Subsidiary Stock
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Exhibit C-1 Form of Compliance Certificate
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered
into as of September 29, 1997 between FOOTHILL CAPITAL CORPORATION, a
California corporation ("Foothill"), with a place of business located at 11111
Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333 and Aid
Auto Stores, Inc., a Delaware corporation, and Ames Automotive Warehouse, Inc.,
a New York corporation, jointly and severally, (collectively referred to herein
as "Borrower"), with the chief executive office of Borrower located at 275 Grand
Boulevard, Westbury, New York 11590.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of services
by Borrower, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is under common
control with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to vote 5% or more of the securities having ordinary voting power for the
election of directors or the direct or indirect power to direct the management
and policies of a Person.
"Agreement" has the meaning set forth in the preamble hereto.
"Authorized Person" means any officer or other employee of
Borrower.
"Average Unused Portion of Maximum Revolving Amount"
means, as of any date of determination, (a) the Maximum Revolving Amount, less
(b) the sum of the average Daily Balance of Advances that were outstanding
during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. SS 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Blocked Account" shall mean a depositary account established
pursuant to one of the Blocked Account Agreements.
"Blocked Account Agreements" means those certain Blocked
Account Operating Procedural Agreements and those certain Depository Account
Agreements, in form and substance satisfactory to Foothill, each of which is
among Borrower, Foothill, and one of the Blocked Account Banks.
"Blocked Account Banks" means European American Bank and
The Chase Manhattan Bank or such other banks as may be agreed to by Borrower
and Foothill from time to time.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 40% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"Closing Date" means the date of the first to occur of the
making of the initial Advance or the funding of the Term Loan.
"Code" means the New York Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) the Real Property Collateral,
(h) any money, or other assets of Borrower, including but
not limited to periodic payments currently due and past due from franchisees
under Aid Auto franchise agreements which payments are in the nature of
franchise fees and marketing fees for both multiple store and local store
advertising coverage, that now or hereafter come into the possession, custody,
or control of Foothill, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the Collateral, and any and all Accounts, Borrower's Books,
Equipment, General Intangibles, Inventory, Negotiable Collateral, Real Property,
money, deposit accounts, or other tangible or intangible property resulting from
the sale, exchange, collection, or other disposition of any of the foregoing, or
any portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgement agreement of any
warehouseman, processor, lessor, consignee, or other Person in possession of,
having a Lien upon, or having rights or interests in the Equipment or Inventory,
in each case, in form and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments,
and other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Foothill.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all Obligations outstanding
under this Agreement shall be deemed to be current liabilities without regard
to whether they would be deemed to be so under GAAP.
"Daily Balance" means the amount of an Obligation owed at
the end of a given day.
"Deems Itself Insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1-208 of the Code.
"Default" means an event, condition, or default that, with
the giving of notice, the passage of time, or both, would be an Event of
Default.
"Designated Account" means account number 00351599 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Bankers Trust, whose office
is located at 130 Liberty Street, New York, New York 10006, and whose ABA
number is 021001033.
"Dilution" means, in each case based upon the experience of
the immediately prior three (3) months, the result of dividing the Dollar amount
of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to the Accounts, by (b) Borrower's
Collections (excluding extraordinary items) plus the Dollar amount of clause
(a).
"Dilution Reserve" means, as of any date of determination,
an amount sufficient to reduce Foothill's advance rate against Eligible Accounts
by one percentage point for each percentage point by which Dilution is in excess
of five (5%) percent.
"Disbursement Letter" means an instructional letter executed
and delivered by Borrower to Foothill regarding the extensions of credit to be
made on the Closing Date, the form and substance of which shall be satisfactory
to Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"Eligible Accounts" means those Accounts created by Borrower
in the ordinary course of business, that arise out of Borrower's sale of goods
or rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by Borrower to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in the exercise of Foothill's reasonable commercial judgement in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable credit judgment.
Eligible Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
within ninety (90) days of invoice date or Accounts with selling terms of more
than sixty (60) days;
(b) Accounts owed by an Account Debtor or its Affiliates
where 50% or more of all Accounts owed by that Account Debtor (or its
Affiliates) are deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is
an employee, Affiliate or agent of Borrower;
(d) Accounts which are on a COD basis with Borrower and
Accounts with respect to which goods are placed on consignment, guaranteed
sale, sale or return, sale on approval, bill and hold, or other terms by reason
of which the payment by the Account Debtor may be conditional;
(e) Accounts that are not payable in Dollars or with
respect to which the Account Debtor: (i) does not maintain its chief executive
office in the United States, or (ii) is not organized under the laws of the
United States or any State thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province, municipality, or other
political subdivision thereof, or of any department, agency, public corporation,
or other instrumentality thereof, unless (y) the Account is supported by an
irrevocable letter of credit satisfactory to Foothill (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Foothill and
is directly drawable by Foothill, or (z) the Account is covered by credit
insurance in form and amount, and by an insurer, satisfactory to Foothill in
its reasonable credit judgment;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of Accounts with respect to which
Borrower has complied, to the satisfaction of Foothill, with the Assignment of
Claims Act, 31 U.S.C. SS3727), or (ii) any State of the United States
(exclusive, however, of Accounts owed by any State that does not have a
statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with respect to the Account;
(h) Accounts with respect to an Account Debtor other than
Pathmark Corporation, whose total obligations owing to Borrower exceed 10% of
all Eligible Accounts and Accounts due from Pathmark Corporation which exceed
20% of all Eligible Accounts; provided however that the amount of Accounts from
an Account Debtor other than Pathmark Corporation in excess of 10% of all
Eligible Accounts and the amount of Accounts from Pathmark Corporation in
excess of 20% of all Eligible Accounts may be included in Eligible Accounts
up to an aggregate, at any time, of $250,000 provided that the credit quality of
any such Account Debtor of such Account is acceptable to Foothill in the
exercise of Foothill's reasonable commercial judgement;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(k) Accounts with respect to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
(l) Commencing forty-five (45) days after the Closing Date,
Accounts with respect to which the Account Debtor is located in the states of
New Jersey, Minnesota, Indiana, or West Virginia (or any other state that
requires a creditor to file a Business Activity Report or similar document in
order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless
Borrower has qualified to do business in New Jersey, Minnesota, Indiana, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement;
(m) Accounts that represent progress payments or other
advance billings that are due prior to the completion of performance by Borrower
of the subject contract for goods or services;
(n) Accounts, obligations and payments owing to Borrower
from its franchisees for initial or monthly franchise fee payments or for
monthly contributions from franchisees for advertising and promotion costs;
and
(o) Accounts due from Rickel Home Centers, Inc., Rickel
Home Centers, Inc., as Debtor in Possession or any Subsidiary or Affiliate of
Rickel Home Centers, Inc.
"Eligible Inventory" means Inventory consisting of first
quality finished goods held for sale in the ordinary course of Borrower's
business, that are located at or in-transit between Borrower's premises
identified on Schedule E-1, that strictly comply with each and all of the
representations and warranties respecting Inventory made by Borrower to Foothill
in the Loan Documents, and that are and at all times continue to be acceptable
to Foothill in the exercise of Foothill's reasonable commercial judgement in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable credit judgment.
In determining the amount to be so included, Inventory shall be valued at the
lower of cost or market on a basis consistent with Borrower's current and
historical accounting practices. An item of Inventory shall not be included
in Eligible Inventory if:
(a) it is not owned solely by Borrower or Borrower does
not have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1 as amended from time to time and as to which Foothill has obtained
a validly perfected first priority security interest;
(c) it is not located on property owned or leased by
Borrower or in a contract warehouse, in each case, subject to a Collateral
Access Agreement executed by the mortgagee, lessor, the warehouseman, or other
third party, as the case may be, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of Foothill;
(e) it consists of goods returned or rejected by
Borrower's customers and defective goods which in the aggregate exceed
$650,000 and goods received for remanufacture, samples or goods in transit;
(f) it is obsolete or slow moving, a restrictive or custom
item, work-in-process, a component that is not part of finished goods, or
constitutes spare parts, packaging and shipping materials, supplies used or
consumed in Borrower's business, Inventory subject to a Lien in favor of any
third Person, bill and hold goods, defective goods, "seconds," or Inventory
acquired on consignment; and
(g) it is Inventory located in a Rickel Home Center, Inc.
store or location whether directly or indirectly and whether in a leased
department or otherwise.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. SS 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees
of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees
of Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of
its Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year
in which it was a "substantial employer" (as defined in Section 4001(a)(2) of
ERISA), (c) the providing of notice of intent to terminate a Benefit Plan in
a distress termination (as described in Section 4041(c) of ERISA), (d) the
institution by the PBGC of proceedings to terminate a Benefit Plan or
Multiemployer Plan, (e) any event or condition (i) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan or Multiemployer Plan,
or (ii) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA, (f) the partial or complete withdrawal within
the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means General Electric Credit Corporation.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by Foothill; fees or charges paid or
incurred by Foothill in connection with Foothill's transactions with Borrower,
including, fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Personal Property
Collateral appraisals); real estate surveys, title policies and endorsements,
and environmental audits during such time as real property constitutes a portion
of the Collateral; costs and expenses incurred by Foothill in the disbursement
of funds to Borrower (by wire transfer or otherwise); charges paid or incurred
by Foothill resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Personal Property Collateral or the Real Property Collateral, or any portion
thereof, irrespective of whether a sale is consummated; costs and expenses paid
or incurred by Foothill in examining Borrower's Books; costs and
expenses of third party claims or any other suit paid or incurred by Foothill in
enforcing or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrower or
any guarantor; and Foothill's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Hazardous Materials" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of Borrower for
borrowed money, (b) all obligations of Borrower evidenced by bonds, debentures,
notes, or other similar instruments and all reimbursement or other obligations
of Borrower in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower under
capital leases, (d) all obligations or liabilities of others secured by a
Lien on any property or asset of Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Inventory Reserves" means reserves (determined from time to
time by Foothill in its reasonable discretion exercised in good faith) for the
estimated reclamation claims of unpaid sellers of Inventory sold to Borrower.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Lien" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement
Letter, the Blocked Account Agreements, the Mortgages, any note or notes
executed by Borrower and payable to Foothill, and any other agreement entered
into, now or in the future, in connection with this Agreement.
"Material Adverse Change" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrower, (b) the material
impairment of Borrower's ability to perform its obligations under the Loan
Documents to which it is a party or of Foothill to enforce the Obligations or
realize upon the Collateral, (c) a material adverse effect on the value of the
Collateral or the amount that Foothill would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral, or (d) a material impairment of the priority of Foothill's
Liens with respect to the Collateral.
"Maximum Amount" means the Maximum Revolving Amount plus
the then-outstanding amount of the Term Loan.
"Maximum Revolving Amount" means $10,000,000; provided
however, Borrower may, once during the term of this Agreement, request in
writing at any time after Borrower's perpetual inventory tracking and reporting
system and point of sale systems are operational and provided that no Event of
Default has occurred and no event or condition exists at the time of such
request that is or would with the passage of time become an Event of Default,
request that Lender increase the Maximum Revolving Amount to $15,000,000 and
upon receipt of such written request, confirmation by Foothill of the
satisfaction of the conditions stated herein and payment by Borrower of the
Line Increase Fee set forth in Section 2.11(f), the increase in the Maximum
Revolving Amount shall be implemented.
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by Borrower in favor of Foothill, the form and
substance of which shall be reasonably satisfactory to Foothill in its
reasonable credit judgment, that encumber the Real Property Collateral and the
related improvements thereto to be granted at such time as Foothill Deems Itself
Insecure or an Event of Default exists and Foothill so requests.
"Multiemployer Plan" means a "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) to which Borrower, any of its
Subsidiaries, or any ERISA Affiliate has contributed, or was obligated to
contribute, within the past six years.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, investment property,
security entitlements, securities (including the shares of stock of Subsidiaries
of Borrower), documents, personal property leases (wherein Borrower is the
lessor), chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, Advances, debts, principal,
interest (including any interest that, but for the provisions of the Bankruptcy
Code, would have accrued), contingent reimbursement obligations under any
outstanding Letters of Credit, premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Pay-Off Letter" means a letter, in form and substance
reasonably satisfactory to Foothill, from Existing Lender respecting the amount
necessary to repay in full all of the obligations of Borrower owing to Existing
Lender and obtain a termination or release of all of the Liens existing in favor
of Existing Lender in and to the properties or assets of Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means (a) Liens held by Foothill, (b)
Liens for unpaid taxes that either (i) are not yet due and payable or (ii) are
the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases and purchase money Liens of lessors
under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased or acquired and only secures the purchase price
of the asset, (e) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
in the ordinary course of business of Borrower and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet due and
payable, or (ii) are the subject of Permitted Protests, (f) Liens arising from
deposits made in connection with obtaining worker's compensation or other
unemployment insurance, (g) Liens or deposits to secure performance of bids,
tenders, or leases (to the extent permitted under this Agreement), incurred
in the ordinary course of business of Borrower and not in connection with the
borrowing of money, (h) Liens arising by reason of security for surety or appeal
bonds in the ordinary course of business of Borrower, (i) Liens of or
resulting from any judgment or award that would not have a Material Adverse
Effect and as to which the time for the appeal or petition for rehearing of
which has not yet expired, or in respect of which Borrower is in good faith
prosecuting an appeal or proceeding for a review, and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured,
(j) Liens with respect to the Real Property Collateral that are exceptions to
the commitments for title insurance issued in connection with the Mortgage,
as accepted by Foothill, and (k) with respect to any Real Property that is
not part of the Real Property Collateral, easements, rights of way, zoning
and similar covenants and restrictions, and similar encumbrances that
customarily exist on properties of Persons engaged in similar activities and
similarly situated and that in any event do not materially interfere with
or impair the use or operation of the Collateral by Borrower or the value of
Foothill's Lien thereon or therein, or materially interfere with the ordinary
conduct of the business of Borrower.
"Permitted Protest" means the right of Borrower to protest
any Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve, established in accordance
with GAAP, with respect to such obligation is established on the books of
Borrower in an amount that is reasonably satisfactory to Foothill, (b) any
such protest is instituted and diligently prosecuted by Borrower in good
faith, and (c) Foothill is satisfied that, while any such protest is pending,
there will be no impairment of the enforceability, validity, or priority of
any of the Liens of Foothill in and to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other
than the Real Property Collateral.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by Borrower or with respect to which it
may incur liability.
"Real Property" means any estates or interests in real
property now owned or hereafter acquired by Borrower.
"Real Property Collateral" means the parcel or parcels of
real property and the related improvements thereto identified on Schedule R-1,
and any Real Property hereafter acquired by Borrower.
"Reference Rate" means the variable rate of interest, per
annum, most recently announced by Norwest Bank Minnesota, National Association,
or any successor thereto, as its "base rate," irrespective of whether such
announced rate is the best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.4.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"Retiree Health Plan" means an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it
will, incur debts beyond such Person's ability to pay as such debts mature,
and (e) such Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such Person's properties
and assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such
Person is engaged. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount that,
in light of all the facts and circumstances existing at such time, represents
the amount that reasonably can be expected to become an actual or matured
liability.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors
(or appoint other comparable managers) of such corporation, partnership,
limited liability company, or other entity.
"Tangible Net Worth" means, as of any date of determination,
the difference of (a) Borrower's total stockholder's equity, minus (b) the sum
of: (i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid
expenses, and (iii) all amounts due to Borrower from Affiliates.
"Term Loan" has the meaning set forth in Section 2.3.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial covenant or a
related definition, it shall be understood to mean Borrower on a consolidated
basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. An Event of
Default shall "continue" or be "continuing" until such Event of Default has
been waived in writing by Foothill. Section, subsection, clause, schedule,
and exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any
of the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
1.6 Joint and Several Borrowing. Each of Aid Auto Stores, Inc.
and Ames Automotive Warehouse, Inc. agree that for borrowing purposes a
separate Borrowing Base shall be calculated for each entity under Section 2.1 of
this Agreement. All advances hereunder shall be made to Aid Auto Stores, Inc.
as the parent corporation for itself and as agent for Ames Automotive Warehouse,
Inc. and Aid Auto Stores, Inc. and Ames Automotive Warehouse, Inc. agree that
Aid Auto Stores, Inc. shall be responsible for the allocation and distribution
of each advance as is necessary to meet the operating and administrative needs
of each company. Each of Aid Auto Stores, Inc. and Ames Automotive Warehouse,
Inc. constitutes and appoints Aid Auto Stores, Inc. as its respective agent
for borrowing purposes to receive all advances hereunder and that they as an
integrated family of companies will allocate and distribute such amounts of
each Advance as necessary such that Foothill need only deal with and advance
to Aid Auto Stores, Inc.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to Borrower in an amount
outstanding not to exceed at any one time the lesser of (i) the Maximum
Revolving Amount, or (ii) the Borrowing Base less the aggregate amount of the
Inventory Reserves. For purposes of this Agreement, "Borrowing Base", as of
the Closing Date and during the first one hundred eighty (180) days thereafter,
shall mean the result of:
(x) the lesser of (i) one million five hundred
thousand ($1,500,000) Dollars, or (ii) eighty five (85%) percent
of Eligible Accounts, less the amount, if any, of the Dilution
Reserve, or (iii) an amount equal to Borrower's Collections with
respect to Accounts for the immediately preceding forty-five (45)
day period, plus
(y) the lowest of (i) sixty five (65%) percent of
the value of Eligible Inventory at cost, or (ii) up to ninety (90%)
percent of the liquidation value (as determined by an appraiser
acceptable to Foothill in the exercise of Foothill's reasonable
commercial judgement having performed an Inventory liquidation
value appraisal prior to the Closing Date and at Foothill's
discretion periodically thereafter but, absent an Event of Default,
not more frequently than each three months during each twelve (12)
month loan period) of Eligible Inventory, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
For purposes of this Agreement, "Borrowing Base", after the one hundred
eightieth (180th) day and through the two hundred seventieth (270th) day
subsequent to the Closing Date, as of the date of any determination thereof,
shall mean the result of:
(x) the lesser of (i) one million five hundred
thousand ($1,500,000) Dollars, or (ii) eighty five (85%) percent
of Eligible Accounts, less the amount, if any, of the Dilution
Reserve, or (iii) an amount equal to Borrower's Collections with
respect to Accounts for the immediately preceding forty-five (45)
day period, plus
(y) the lowest of (i) sixty two and one-half
(62.50%) percent of the value of Eligible Inventory at cost, or
(ii) up to eighty five (85.00%) percent of the liquidation value
(as determined by an appraiser acceptable to Foothill in the
exercise of Foothill's reasonable commercial judgement having
performed an Inventory liquidation value appraisal prior to the
Closing Date and at Foothill's discretion periodically thereafter
but, absent an Event of Default, not more frequently than each
three months during each twelve (12) month loan period) of
Eligible Inventory, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
For purposes of this Agreement, "Borrowing Base", after the two hundred
seventieth (270th) day and through the last day of the twelfth month subsequent
to the Closing Date, as of the date of any determination thereof, shall mean the
result of:
(x) the lesser of (i) one million five hundred
thousand ($1,500,000) Dollars, or (ii) eighty five (85%) percent
of Eligible Accounts, less the amount, if any, of the Dilution
Reserve, or (iii) an amount equal to Borrower's Collections with
respect to Accounts for the immediately preceding forty-five (45)
day period, plus
(y) the lowest of (i) sixty one and one-quarter
(61.25%) percent of the value of Eligible Inventory at cost, or
(ii) up to eighty two and one-half (82.50%) percent of the
liquidation value (as determined by an appraiser acceptable to
Foothill in the exercise of Foothill's reasonable commercial
judgement having performed an Inventory liquidation value
appraisal prior to the Closing Date and at Foothill's
discretion periodically thereafter but, absent an Event of
Default, not more frequently than each three months during each
twelve (12) month loan period) of Eligible Inventory, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
For purposes of this Agreement, "Borrowing Base", after the twelfth (12th) month
subsequent to the Closing Date, as of the date of any determination thereof,
shall mean the result of:
(x) the lesser of (i) one million five hundred
thousand ($1,500,000) Dollars, or (ii) eighty five (85%) percent of
Eligible Accounts, less the amount, if any, of the Dilution
Reserve, or (iii) an amount equal to Borrower's Collections with
respect to Accounts for the immediately preceding forty-five (45)
day period, plus
(y) the lowest of (i) sixty (60%) percent of the
value of Eligible Inventory at cost, or (ii) up to eighty (80.00%)
percent of the liquidation value (as determined by an appraiser
acceptable to Foothill in the exercise of Foothill's reasonable
commercial judgement having performed an Inventory liquidation
value appraisal prior to the Closing Date and at Foothill's
discretion periodically thereafter but, absent an Event of Default,
not more frequently than each three months during each twelve (12)
month loan period) of Eligible Inventory, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b).
Notwithstanding anything to the contrary contained in this Section 2.1(a), on or
after the Closing Date, Foothill, in its sole discretion, may consider, upon
Borrower's written request, modifications to the above-referenced Borrowing Base
calculation terms as to Eligible Inventory only, utilizing Foothill's experience
with such factors as Foothill shall deem appropriate, Borrower's financial
performance and the performance of the Collateral.
Notwithstanding anything to the contrary contained above in this Section 2.1(a),
Foothill, in its sole discretion, may consider, upon Borrower's written request,
temporary seasonal modifications in the nature of increases to the above-
referenced Borrowing Base calculation terms as to Eligible Inventory only,
utilizing Foothill's experience during the term of this Agreement to the date of
such request with such factors as Foothill shall deem appropriate, Borrower's
financial performance and results during the term of this Agreement to the date
of such request and the performance of the Collateral; provided however that
advances against Eligible Inventory shall not at any time exceed ninety (90%)
of the liquidation value (as determined by an appraiser acceptable to Foothill
in the exercise of Foothill's reasonable commercial judgement having performed
an Inventory liquidation value appraisal) and provided further that the charges
and costs of any temporary or seasonal modifications are to be established by
Foothill in connection with such request. Notwithstanding the foregoing, at
no time shall Foothill be obligated, upon Borrower's written request, to
modify the Borrowing Base calculation terms.
(b) Anything to the contrary in Section 2.1(a) above
notwith-standing, Foothill may create reserves against or reduce its advance
rates based upon Eligible Accounts or Eligible Inventory without declaring
an Event of Default if it determines, reasonably and in good faith, that there
has occurred a Material Adverse Change. Foothill agrees to give notice to
Borrower within a reasonable period of time of the implementation of reserves
created under this Section and the reason for the creation of such reserve.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations to exceed
the Maximum Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement, reborrowed at
any time during the term of this Agreement.
2.2 Intentionally Deleted.
2.3 Term Loan. Foothill has agreed to make a term loan (the
"Term Loan") to Borrower in the original principal amount of one hundred seventy
five thousand ($175,000) Dollars. The Term Loan shall be repaid in eleven (11)
equal monthly installments of principal in the amount of fourteen thousand five
hundred eighty three and 33/00 ($14,583.33) Dollars commencing on November 1,
1997 and continuing on the first day of each month thereafter and on October 1,
1998 a payment of the entire remaining principal balance owing on the Term Loan
together with all accrued and unpaid interest and any charges in connection with
the Term Loan in order for the Term Loan to be paid in full. The outstanding
principal balance and all accrued and unpaid interest under the Term Loan shall
be due and payable upon the termination of this Agreement, whether by its terms,
by prepayment, by acceleration, or otherwise. The unpaid principal balance of
the Term Loan may be prepaid in whole or in part without penalty or premium at
any time during the term of this Agreement with all such prepaid amounts to be
applied to the installments due on the Term Loan in the inverse order of their
maturity. All amounts outstanding under the Term Loan shall constitute
Obligations.
2.4 Intentionally Deleted.
2.5 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater
than either the Dollar or percentage limitations set forth in Sections 2.1, (an
"Overadvance"), Borrower immediately shall pay to Foothill, in cash, the amount
of such excess to be used by Foothill to repay Advances outstanding under
Section 2.1.
2.6 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as provided in clause (c) below,
(i) all Obligations shall bear interest at a per annum rate of one (1.00)
percentage point above the Reference Rate.
(b) Intentionally Deleted.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, all Obligations shall bear interest at
a per annum rate equal to four (4) percentage points above the Reference Rate.
(d) Payments. Interest payable hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, all Foothill Expenses (as and when incurred),
the charges, commissions, fees, and the fees and charges provided for in Section
2.11 (as and when accrued or incurred), and all installments or other payments
due under the Term Loan or any Loan Document to Borrower's Loan Account, which
amounts thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder.
(e) Computation. The Reference Rate as of the date of
this Agreement is eight and one-half (8.5%) percent. In the event the
Reference Rate is changed from time to time hereafter, the applicable rate of
interest hereunder automatically and immediately shall be increased or decreased
by an amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a 360 day
year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, plus any
other amounts paid in connection herewith, exceed the highest rate permissible
under any law that a court of competent jurisdiction shall, in a final
determination, deem applicable. Borrower and Foothill, in executing and
delivering this Agreement, intend legally to agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto as of the date of this Agreement, Borrower
is and shall be liable only for the payment of such maximum as allowed by law,
and payment received from Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.
2.7 Collection of Accounts. Borrower shall at all times
maintain Blocked Accounts and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of Borrower to remit all Collections in respect
thereof to such Blocked Accounts. Borrower, Foothill, and the Blocked Account
Banks shall enter into the Blocked Account Agreements, which among other things
shall provide for the opening of a Blocked Account for the deposit of
Collections at a Blocked Account Bank. Borrower agrees that all Collections
and other amounts received by Borrower from any Account Debtor or any other
source immediately upon receipt shall be deposited into a Blocked Account. No
Blocked Account Agreement or arrangement contemplated thereby shall be modified
by Borrower without the prior written consent of Foothill. Upon the terms and
subject to the conditions set forth in the Blocked Account Agreements, all
amounts received in each Blocked Account shall be wired each Business Day into
an account (the "Foothill Account") maintained by Foothill at a depositary
selected by Foothill.
2.8 Crediting Payments; Application of Collections. The receipt
of any Collections by Foothill (whether from transfers to Foothill by the
Blocked Account Banks pursuant to the Blocked Account Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under Section 2.1, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and
is made to the Foothill Account or unless and until such Collection item is
honored when presented for payment. From and after the Closing Date, Foothill
shall be entitled to charge Borrower for two (2) Business Days of `clearance'
or `float' at the rate set forth in Section 2.6(a) or Section 2.6(c), as
applicable, on all Collections that are received by Foothill (regardless of
whether forwarded by the Blocked Account Banks to Foothill, whether
provisionally applied to reduce the Obligations under Section 2.1, or
otherwise). This across-the-board two (2) Business Day clearance or float
charge on all Collections is acknowledged by the parties to constitute an
integral aspect of the pricing of Foothill's financing of Borrower, and shall
apply irrespective of the characterization of whether receipts are owned by
Borrower or Foothill, and whether or not there are any outstanding Advances,
the effect of such clearance or float charge being the equivalent of charging
two (2) Business Days of interest on such Collections. Should any Collection
item not be honored when presented for payment, then Borrower shall be deemed
not to have made such payment, and interest shall be recalculated accordingly.
Anything to the contrary contained herein notwithstanding, any Collection item
shall be deemed received by Foothill only if it is received into the Foothill
Account on a Business Day on or before 11:00 a.m. California time. If any
Collection item is received into the Foothill Account on a non-Business Day
or after 11:00 a.m. California time on a Business Day, it shall be deemed to
have been received by Foothill as of the opening of business on the immediately
following Business Day.
2.9 Designated Account. Foothill is authorized to make the
Advances and the Term Loan under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized Person.
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Foothill hereunder. Unless
otherwise agreed by Foothill and Borrower, any Advance requested by Borrower
and made by Foothill hereunder shall be made to the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations.
Foothill shall maintain an account on its books in the name of Borrower (the
"Loan Account") on which Borrower will be charged with all Advances and the
Term Loan made by Foothill to Borrower or for Borrower's account, including,
accrued interest, Foothill Expenses, and any other payment Obligations of
Borrower. In accordance with Section 2.8, the Loan Account will be credited
with all payments received by Foothill from Borrower or for Borrower's account,
including all amounts received in the Foothill Account from any Blocked Account
Bank. Foothill shall render statements regarding the Loan Account to Borrower,
including principal, interest, fees, and including an itemization of all charges
and expenses constituting Foothill Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and Foothill unless, within 30 days after receipt
thereof by Borrower, Borrower shall deliver to Foothill written objection
thereto describing the error or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. On the Closing Date, a closing fee of
$25,000;
(b) Unused Line Fee. On the first day of each month during
the term of this Agreement, an unused line fee in an amount equal to 0.25% per
annum times the Average Unused Portion of the Maximum Revolving Amount.
(c) Annual Facility Fee. On each annual anniversary of the
Closing Date, an annual facility fee in an amount equal to 0.25% of the Maximum
Amount;
(d) Financial Examination and Appraisal Fees. Foothill's
customary fee of six hundred fifty ($650) Dollars per day per examiner, plus
out-of- pocket expenses for each financial analysis and examination (i.e.
audits) of Borrower performed by personnel employed by Foothill; Foothill's
customary appraisal fee of one thousand five hundred ($1,500) Dollars per day
per appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by personnel employed by Foothill; and, the actual charges paid or
incurred by Foothill if it elects to employ the services of one or more third
Persons to perform such financial analyses and examinations (i.e. audits) of
Borrower or to appraise the Collateral (including but not limited to appraisers
engaged by Foothill if Foothill elects to conduct, prior to the occurrence of
an Event of Default, not more frequently than on a quarterly basis, an appraisal
of Borrowers Inventory to determine and report to Foothill as to the liquidation
value of such Inventory for Borrowing Base calculation purposes); provided
however that the above describedFinancial Examination and Appraisal Fees
shall not exceed thirty five thousand ($35,000) Dollars per year plus out of
pocket expenditures prior to the occurrence of an Event of Default; and
(e) Servicing/Collateral Management Fee. On the first day
of each month during the term of this Agreement, and thereafter so long as any
Obligations are outstanding, a servicing/collateral management fee in an amount
equal to one thousand five hundred ($1,500.00) Dollars; and
(f) Line Increase Fee. Upon Borrower's request for an
increase in the Maximum Revolving Amount and Borrower's satisfaction of the
conditions thereto, Borrower shall pay to Foothill at the time of the increase
in the Maximum Revolving Amount the sum of 0.25% per annum, prorated for the
period from the effective date of such increase to the time of payment of the
next Annual Facility Fee of the amount of the increase in the Maximum Amount.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to the Initial Advance and the Term
Loan. The obligation of Foothill to make the initial Advance and to make the
Term Loan is subject to the fulfillment, to the satisfaction of Foothill and
its counsel, of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
September 30, 1997;
(b) Foothill shall have received searches reflecting the
filing of its financing statements and fixture filings;
(c) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
a. the Blocked Account Agreements;
b. the Disbursement Letter;
c. the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the
termination by Existing Lender of its Liens in and to the
properties and assets of Borrower; and
d. debt subordination agreements from Philip L.
Stephen and Werner S. Neuburger.
(d) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution, delivery, and performance of this
Agreement and the other Loan Documents to which Borrower is a party and
authorizing specific officers of Borrower to execute the same;
(e) Foothill shall have received copies of Borrower's
Governing Documents, as amended, modified, or supplemented to the Closing
Date, certified by the Secretary of Borrower;
(f) Foothill shall have received a certificate of status
with respect to Borrower, dated within 10 days of the Closing Date, such
certificate to be issued by the appropriate officer of the jurisdiction of
organization of Borrower, which certificate shall indicate that Borrower is
in good standing in such jurisdiction;
(g) Foothill shall have received certificates of status
with respect to Borrower, each dated within 15 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions in
which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(h) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(i) Foothill shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as
Borrower shall be able to obtain utilizing Borrower's best efforts, provided
however, that Borrower must produce on the Closing Date Collateral Access
Agreements from the Estate of Marvin L. Linder, 1161 Meadowbrook Road, North
Merrick, New York 11566 for 275 Grand Boulevard, Westbury, New York 11590 and
from Grand Street Realty, LLC, 3 Manhattanville Road, Purchase, New York 10577,
pursuant to a lease with Jersey City Aid Auto, Inc. for 428 Grand Street, Jersey
City, New Jersey and provided further that Borrower must produce on the Closing
Date Collateral Access Agreements from each of the Subsidiaries set forth in
Section 5.16, except for Perfect Choice Automotive Products, Inc. and provided
further that Borrower shall provide from each of the Subsidiaries set forth in
Section 5.16, except for Perfect Choice Automotive Products, Inc. a grant of
rights to Borrower for each location set forth on Schedule 6.12 which is leased
to a Subsidiary set forth in Section 5.16, except for Perfect Choice Automotive
Products, Inc.;
(j) Foothill shall have received an opinion of Borrower's
counsel in form and substance satisfactory to Foothill in its sole discretion;
(k) Foothill shall have received appraisals of the
Inventory satisfactory to Foothill;
(l) Foothill shall have received satisfactory evidence
that all tax returns required to be filed by Borrower have been timely filed and
all taxes upon Borrower or its properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(m) Borrower shall have unused availability for borrowing
of not less than $500,000 on the Closing Date after giving effect to the
repayment of Existing Lender, payment of the Closing Fee and payment of all
Foothill Expenses associated with the Closing; and
(n) all other documents and legal matters in connection
with the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to
Foothill and its counsel.
3.2 Conditions Precedent to all Advances and the Term Loan.
The following shall be conditions precedent to all Advances and the Term Loan
hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall either result
from the making thereof; and
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 Condition Subsequent. As a condition subsequent to initial
closing hereunder, Borrower shall perform or cause to be performed the following
(the failure by Borrower to so perform or cause to be performed constituting an
Event of Default):
(a) within thirty (30) days of the Closing Date, Borrower
shall have delivered to Foothill the certified copies of the policies of
insurance, together with the endorsements thereto, as are required by Section
6.10, the form and substance of which shall be satisfactory to Foothill and
its counsel;
(b) on or before February 15, 1998, Borrower shall have
implemented, installed and have fully operational, to the satisfaction of
Foothill utilizing reasonable credit judgment, a point of sale system in each
of its locations;
(c) on or before February 15, 1998, Borrower shall have
implemented, installed and have fully operational, to the satisfaction of
Foothill utilizing reasonable credit judgment, a perpetual inventory reporting
and tracking system;
(d) within thirty (30) days of the Closing Date, Borrower
shall have delivered to Foothill all Landlord Waivers and Consents, not
delivered on the Closing Date, this requirement being subject however, to
Borrower utilizing its best efforts, only, to obtain such Landlord Waivers and
Consents;
(e) within thirty (30) day of the Closing Date, Borrower
shall have delivered to Foothill a writing from United Jersey Bank confirming
that UCC filing number 1324448 with the Secretary of State of New Jersey dated
3/6/90 does not apply to Borrower or the Collateral or such other evidence as
is reasonably satisfactory to Foothill; and
(f) within thirty (30) day of the Closing Date, Borrower
shall have delivered to Foothill a writing from Middle Atlantic Warehouse
Distributor, Inc. confirming that UCC filing number 96PQ05429 with the Queens
County Recorder dated 4/16/96 does not apply to Borrower or the Collateral.
3.4 Term; Automatic Renewal. This Agreement shall become
effective upon the execution and delivery hereof by Borrower and Foothill and
shall continue in full force and effect for a term ending on the date (the
"Renewal Date") that is three (3) years from the Closing Date and automatically
shall be renewed for successive one (1) year periods thereafter, unless sooner
terminated pursuant to the terms hereof. Either party may terminate this
Agreement effective on the Renewal Date or on any three year anniversary of
the Renewal Date by giving the other party at least 90 days prior written
notice. The foregoing notwithstanding, Foothill shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this
Agreement, all Obligations immediately shall become due and payable without
notice or demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants hereunder,
and Foothill's continuing security interests in the Collateral shall remain
in effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated.
If Borrower has sent a notice of termination pursuant to the provisions of
Section 3.4, but fails to pay the Obligations in full on the date set forth
in said notice, then Foothill may, but shall not be required to, renew this
Agreement for an additional term of three (3) years.
3.6 Early Termination by Borrower. The provisions of Section
3.4 that allow termination of this Agreement by Borrower only on the Renewal
Date and certain anniversaries thereof notwithstanding, Borrower has the
option, at any time upon 90 days prior written notice to Foothill, to terminate
this Agreement by paying to Foothill, in cash, the Obligations in full, together
with a premium (the "Early Termination Premium") equal to one (1%) percent of
the Maximum Amount on the Closing Date if termination occurs during the first
twenty four (24) months following the Closing Date. There shall be no Early
Termination Premium if termination occurs, for any reason, during the twenty
fifth (25th) through the thirty sixth (36th) months after the Closing Date.
There shall be no Early Termination Premium if Borrower terminates this
Agreement due to Foothill's establishment of Reserves which Borrower deems
unnecessary, utilizing reasonable commercial standards for the commercial
finance industry or in the event that Foothill fails, in the opinion of Borrower
utilizing reasonable commercial judgement, to support a material strategic
business expansion or acquisition.
3.7 Termination Upon Event of Default. If Foothill terminates
this Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7
shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and hereafter
acquired or arising Personal Property Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents.
Foothill's security interests in the Personal Property Collateral shall attach
to all Personal Property Collateral without further act on the part of Foothill
or Borrower. Anything contained in this Agreement or any other Loan Document to
the contrary notwithstanding, except for the sale of Inventory to buyers in the
ordinary course of business, Borrower has no authority, express or implied, to
dispose of any item or portion of the Personal Property Collateral or the Real
Property Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower, immediately upon the request of Foothill, shall endorse and deliver
physical possession of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time, after the occurrence of an Event of Default or at any
time Foothill Deems Itself Insecure, Foothill or Foothill's designee may (a)
notify customers or Account Debtors of Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill has a security interest therein, and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to the Loan Account. Borrower agrees that it will hold in trust
for Foothill, as Foothill's trustee, any Collections that it receives and
immediately will deliver said Collections to Foothill in their original form
as received by Borrower.
4.4 Delivery of Additional Documentation Required. At any time
upon the request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney, with
power to (a) if Borrower refuses to, or fails timely to execute and deliver any
of the documents described in Section 4.4, sign the name of Borrower on any of
the documents described in Section 4.4, (b) at any time that an Event of Default
has occurred and is continuing or Foothill Deems Itself Insecure, sign
Borrower's name on any invoice or bill of lading relating to any Account,
drafts against Account Debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to Account Debtors, (c) send requests
for verification of Accounts, (d) endorse Borrower's name on any Collection
item that may come into Foothill's possession, (e) at any time that an Event
of Default has occurred and is continuing or Foothill Deems Itself Insecure,
notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Foothill, to receive and open
all mail addressed to Borrower, and to retain all mail relating to the
Collateral and forward all other mail to Borrower, (f) at any time that an Event
of Default has occurred and is continuing or Foothill Deems Itself Insecure,
make, settle, and adjust all claims under Borrower's policies of insurance and
make all determinations and decisions with respect to such policies of
insurance, and (g) at any time that an Event of Default has occurred and is
continuing or Foothill Deems Itself Insecure, settle and adjust disputes and
claims respecting the Accounts directly with Account Debtors, for amounts and
upon terms that Foothill determines to be reasonable, and Foothill may cause
to be executed and delivered any documents and releases that Foothill determines
to be necessary. The appointment of Foothill as Borrower's attorney, and each
and every one of Foothill's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully and finally repaid
and performed and Foothill's obligation to extend credit hereunder is
terminated.
4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect Borrower's Books and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true, correct,
and complete in all respects as of the date hereof, and shall be true, correct,
and complete in all respects as of the Closing Date, and at and as of the date
of the making of each Advance made thereafter, as though made on and as of the
date of such Advance, (except to the extent that such representations and
warranties relate solely to an earlier date) and such representations and
warranties shall survive the execution and delivery of this Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Accounts. The Eligible Accounts are bona fide
existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of Borrower's
business, unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. The property giving rise
to such Eligible Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional acceptance
by the Account Debtor. Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
Account Debtor regarding any Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is of good and
merchantable quality, free from defects.
5.4 Equipment. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party (without
Foothill's prior written consent) and are located only at the locations
identified on Schedule 6.12 or otherwise permitted by Section 6.12.
5.6 Inventory Records. Borrower keeps correct and accurate
records itemizing and describing the kind, type, quality, and quantity of the
Inventory, and Borrower's cost therefor.
5.7 Location of Chief Executive Office; FEIN. The chief
executive office of Borrower is located at the address indicated in the preamble
to this Agreement and Aid Auto Stores, Inc. FEIN is 11-2254654 and Ames Auto
Warehouse, Inc. FEIN is 11-2312067.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Borrower is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any state where the
failure to be so licensed or qualified reasonably could be expected to have a
Material Adverse Change.
(b) Set forth on Schedule 5.8, is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class
of common and preferred stock authorized for each of such Subsidiaries; and
(iii) the number and the percentage of the outstanding shares of each such
class owned directly or indirectly by Borrower. All of the outstanding capital
stock of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(c) Except as set forth on Schedule 5.8, no capital stock
(or any securities, instruments, warrants, options, purchase rights, conversion
or exchange rights, calls, commitments or claims of any character convertible
into orexercisable for capital stock) of any direct or indirect Subsidiary of
Borrower is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or
claim of any right, title, or interest therein or thereto.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by Borrower
of this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by Borrower
of this Agreement and the Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, or local law or regulation
(including Regulations G, T, U, and X of the Federal Reserve Board) applicable
to Borrower, the Governing Documents of Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on Borrower, (ii)
conflict with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default under any material contractual obligation or material
lease of Borrower, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of stockholders or any
approval or consent of any Person under any material contractual obligation
of Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and mortgages, the execution, delivery, and
performance by Borrower of this Agreement and the Loan Documents to which
Borrower is a party do not and will not require any registration with,
consent, or approval of, or notice to, or other action with or by, any
federal, state, foreign, or other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which
Borrower is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to
its properties and assets pursuant to this Agreement and the other Loan
Documents are validly created, perfected, and first priority Liens, subject
only to Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters disclosed on
Schedule 5.10; and (c) matters arising after the date hereof that, if decided
adversely to Borrower, would not have a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating
to Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not
been a Material Adverse Change with respect to Borrower (or such guarantor,
as applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 Solvency. Borrower is Solvent. No transfer of property is
being made by Borrower and no obligation is being incurred by Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries,
or any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred
that may result in an ERISA Event that reasonably could be expected to result
in a Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 Environmental Condition. None of Borrower's properties or
assets has ever been used by Borrower or, to the best of Borrower's knowledge,
by previous owners or operators in the disposal of, or to produce, store,
handle, treat, release, or transport, any Hazardous Materials. None of
Borrower's properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, or a candidate for closure pursuant to any environmental
protection statute. No Lien arising under any environmental protection
statute has attached to any revenues or to any real or personal property
owned or operated by Borrower. Borrower has not received a summons, citation,
notice, or directive from the Environmental Protection Agency or any other
federal or state governmental agency concerning any action or omission by
Borrower resulting in the releasing or disposing of Hazardous Materials into
the environment.
5.15 Franchisees. The following corporations are now or were
franchisees of Borrower and are not owned, in whole or in part, by Borrower:
Bay Shore Aid Auto Corp., Pearl River Aid, Inc., Satellite World, Inc., Four
Wheel Magician, Inc., Star Totowa, Inc., Ridgefield Auto Parts, Inc., Arthur
Kill Auto Center, Inc., Claumer Auto Stores, Inc., Vanette Auto Supplies, Inc.,
Vittoria Auto Products, Inc., Harmony Distributions, Inc., ASPA Mgmt. Corp. and
Autopost II, Inc. Borrower warrants and represents that any uniform commercial
code filing or evidence of the grant of a security interest by any of the
foregoing are not effective to create in any manner any Lien on any Real
Property or any of the Collateral.
5.16 Subsidiaries. The following corporations are wholly-owned
subsidiaries of Borrower and were set up solely for the purpose of entering into
leases with landlords of locations of Borrower, and except for holding leasehold
interests in real property, they do not have any Accounts, Inventory, Equipment,
General Intangibles or other property, real or personal, tangible or intangible:
Aid Flatlands Avenue, Inc., a New York corporation; White Plains Aid, Inc., a
New York corporation; Bellmore Aid, Inc., a New York corporation; Bethpage
Superstore Aid Auto, Inc., a New York corporation; North Babylon Superstore
Aid Auto, Inc., a New York corporation; Oceanside Superstore Aid Auto, Inc.,
a New York corporation; Jersey City Aid Auto, Inc., a New Jersey corporation;
Hillside Avenue Aid, Inc., a New York corporation; Glen Cove Superstore Aid
Auto, Inc., a New York corporation; and Aid 1715 Flatbush, Inc., a New York
corporation. Cambria Heights Aid, Inc., a New York corporation, is wholly
owned by Philip L. Stephen and was set up solely for the purpose of entering
into a lease for one of the locations of Borrower, and except for holding such
leasehold interest in real property, it does not have any Accounts, Inventory,
Equipment, General Intangibles or other property, real or personal, tangible or
intangible. In addition to the foregoing, Perfect Choice Automotive Products,
Inc., a New York corporation, is a wholly-owned subsidiary of Borrower, and,
except for being the owner of the trademark and Design Trademark PERFECT CHOICE
GUARANTEED QUALITY, Perfect Choice Automotive Products, Inc. does not have any
Accounts, Inventory, Equipment, General Intangibles or other property, real or
personal, tangible or intangible.
5.17 Borrower Execution of Financing Statements. Borrower
warrants, represents, confirms and specifically states that, since June 20,
1997, it has not granted to any Person any security interest in any Collateral
and has not executed any Uniform Commercial Code Financing Statements, except
in favor of Foothill, in any jurisdiction including, but not limited to, the
following:
Secretary of State of
New Jersey
New York
for Aid Auto Stores, Inc.
Clerk of
Bronx County, New York
Kings County, New York
Nassau County, New York
Queens County, New York
Richmond County, New York
Suffolk County, New York
Westchester County, New York
Hudson County, New Jersey
for Aid Auto Stores, Inc.
Secretary of State of
New Jersey
New York
for Ames Automotive Warehouse, Inc.
Clerk of
Bronx County, New York
Kings County, New York
Nassau County, New York
Queens County, New York
Richmond County, New York
Suffolk County, New York
Westchester County, New York
Hudson County, New Jersey
for Ames Automotive Warehouse, Inc.
<PAGE>
Secretary of State of
New Jersey
New York
for Perfect Choice Automotive Products, Inc.
Clerk of
Bronx County, New York
Kings County, New York
Nassau County, New York
Queens County, New York
Richmond County, New York
Suffolk County, New York
Westchester County, New York
Hudson County, New Jersey
for Perfect Choice Automotive Products, Inc.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of
the following:
6.1 Accounting System. Maintain a standard and modern system
of accounting that enables Borrower to produce financial statements in
accordance with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be requested by Foothill.
Borrower also shall keep a modern inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Foothill with the following
documents at the following times in form satisfactory to Foothill: (a) on each
Business Day, a sales journal, collection journal, and credit register since the
last such schedule and a calculation of the Borrowing Base as of such date, (b)
on a monthly basis and, in any event, by no later than the 15th day of each
month during the term of this Agreement, (i) a detailed calculation of the
Borrowing Base, and (ii) a detailed aging, by total, of the Accounts, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by
no later than the 15th day of each month during the term of this Agreement, a
summary aging, by vendor, of Borrower's accounts payable and any book overdraft,
(d) on a monthly basis Inventory reports specifying Borrower's cost and the
wholesale market value of its Inventory with additional detail showing additions
to and deletions from the Inventory, provided that borrowing availability is
$200,000 or greater, but if borrowing availability is less than $200,000,
Borrower shall be required on a weekly basis, to provide Inventory
reports specifying cost and the wholesale market value of its Inventory with
additional detail showing additions to and deletions from the Inventory, to the
extent available; and provided further, that on the earlier of the
implementation of the Borrower's Point of Sale system and the Borrower's
perpetual inventory tracking system or February 15, 1998, Borrower shall, on
a weekly basis, furnish Inventory reports specifying Borrower's cost and the
wholesale market value of its Inventory by category, with additional detail
showing additions to and deletions from the Inventory, (e) on each Business
Day, notice of all returns, disputes, or claims, (f) upon request, copies of
invoices in connection with the Accounts, customer statements, credit memos,
remittance advices and reports, deposit slips, shipping and delivery documents
in connection with the Accounts and for Inventory and Equipment acquired by
Borrower, purchase orders and invoices, (g) on a quarterly basis, a detailed
list of Borrower's customers and cycle counts of Inventory showing the accuracy
of the perpetual inventory reporting system and the quantity and value of the
Inventory, (h) on a monthly basis, a calculation of the Dilution for the prior
month; and (i) such other reports as to the Collateral or the financial
condition of Borrower as Foothill may request from time to time in its
reasonable credit judgment. Original sales invoices evidencing daily sales
shall be mailed by Borrower to each Account Debtor and, at Foothill's direction
after the occurrence of an Event of Default, the invoices shall indicate on
their face that the Account has been assigned to Foothill and that all payments
are to be made directly to Foothill.
6.3 Financial Statements, Reports, Certificates. Deliver to
Foothill: (a) as soon as available, but in any event within 45 days after the
end of each month during each of Borrower's fiscal years, a company prepared
balance sheet, income statement, and statement of cash flow covering Borrower's
operations during such period; and (b) as soon as available, but in any event
within 90 days after the end of each of Borrower's fiscal years, financial
statements of Borrower for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Foothill in the exercise
of Foothill's reasonable commercial judgement and certified, without any
qualifications, by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default. Such audited financial statements shall include
a balance sheet, profit and loss statement, and statement of cash flow and,
if prepared, such accountants' letter to management. If Borrower is a parent
company of one or more Subsidiaries, or Affiliates, or is a Subsidiary or
Affiliate of another company, then, in addition to the financial statements
referred to above, Borrower agrees to deliver financial statements prepared
on a consolidating basis so as to present Borrower and each such related
entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower to its shareholders, and
any other report reasonably requested by Foothill relating to the financial
condition of Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all financial
statements delivered or caused to be delivered to Foothill hereunder have been
prepared in accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present the financial condition of Borrower, (ii) the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date), (iii) for each month that also is the date on which a financial covenant
in Section 7.20 is to be tested, a Compliance Certificate demonstrating in
reasonable detail compliance at the end of such period with the applicable
financial covenants contained in Section 7.20, and (iv) on the date of
delivery of such certificate to Foothill there does not exist any condition or
event that constitutes a Default or Event of Default (or, in the case of clauses
(i), (ii), or (iii), to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action
Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Foothill and to release to Foothill whatever financial information concerning
Borrower that Foothill may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to
Foothill, at Borrower's expense, copies of Borrower's financial statements,
papers related thereto, and other accounting records of any nature in their
possession, and to disclose to Foothill any information they may have regarding
Borrower's business affairs and financial conditions.
6.4 Tax Returns. Deliver to Foothill copies of each of
Borrower's future federal income tax returns, and any amendments thereto,
within 30 days of the filing thereof with the Internal Revenue Service.
6.5 Intentionally Deleted.
6.6 Returns. Cause returns and allowances, if any, as between
Borrower and its Account Debtors to be on the same basis and in accordance with
the usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of Default
has occurred and is continuing, any Account Debtor returns any Inventory to
Borrower, Borrower promptly shall determine the reason for such return and, if
Borrower accepts such return, issue a credit memorandum (with a copy to be sent
to Foothill upon the request of Foothill) in the appropriate amount to such
Account Debtor. If, at a time when an Event of Default has occurred and is
continuing, any Account Debtor returns any Inventory to Borrower, Borrower
promptly shall determine the reason for such return and, if Foothill consents
(which consent shall not be unreasonably withheld), issue a credit memorandum
(with a copy to be sent to Foothill) in the appropriate amount to such Account
Debtor.
6.7 Title to Equipment. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all evidences
of ownership of, certificates of title, or applications for title to any items
of Equipment.
6.8 Maintenance of Equipment. Maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those
items of Equipment that constitute fixtures on the Closing Date, Borrower
shall not permit any item of Equipment to become a fixture to real estate or
an accession to other property, and such Equipment shall at all times remain
personal property.
6.9 Taxes. Cause all assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Borrower shall make due and timely payment or deposit of all such federal,
state, and local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Foothill, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Foothill with proof satisfactory to Foothill
indicating that Borrower has made such payments or deposits.
6.10 Insurance.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured against
by other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Personal Property Collateral,
as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) At its expense, obtain and maintain (i) insurance of
the type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such policies, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property Collateral, in an amount
of not less than $5,000,000; and (iii) business rental insurance covering
annual receipts for a 12 month period for each parcel of Real Property
Collateral.
(c) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably satisfactory to
Foothill. All insurance required herein shall be written by companies which are
authorized to do insurance business in the State of New York. All hazard
insurance and such other insurance as Foothill shall specify, shall contain a
California Form 438BFU (NS) mortgagee endorsement, or an equivalent
endorsement satisfactory to Foothill, showing Foothill as sole loss payee
thereof, and shall contain a waiver of warranties. Every policy of insurance
referred to in this Section 6.10 shall contain an agreement by the insurer that
it will not cancel such policy except after 30 days prior written notice to
Foothill and that any loss payable thereunder shall be payable notwithstanding
any act or negligence of Borrower or Foothill which might, absent such
agreement, result in a forfeiture of all or a part of such insurance payment
and notwithstanding (i) occupancy or use of the Real Property Collateral for
purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by Foothill pursuant to the
Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property Collateral. Borrower shall deliver
to Foothill certified copies of such policies of insurance and evidence of the
payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory
to Foothill evidencing such insurance shall be delivered to Foothill at least 30
days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss. Foothill shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments.
Any monies received as payment for any loss under any insurance policy including
the insurance policies mentioned above, shall be paid over to Foothill to be
applied at the option of Foothill either to the prepayment of the Obligations
without premium, in such order or manner as Foothill may elect, or shall be
disbursed to Borrower under stage payment terms satisfactory to Foothill for
application to the cost of repairs, replacements, or restorations. All repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction. Upon the occurrence of an
Event of Default, Foothill shall have the right to apply all prepaid premiums
to the payment of the Obligations in such order or form as Foothill shall
determine.
(e) Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required to be
maintained under this Section 6.10, unless Foothill is included thereon as
additional insured with the loss payable to Foothill under a standard
California 438BFU (NS) Mortgagee endorsement, or its local equivalent.
Borrower immediately shall notify Foothill whenever such separate insurance
is taken out, specifying the insurer thereunder and full particulars as to
the policies evidencing the same, and originals of such policies immediately
shall be provided to Foothill.
6.11 No Setoffs or Counterclaims. Make payments hereunder and
under the other Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep the Inventory
and Equipment only at the locations identified on Schedule 6.12; provided,
however, that Borrower may amend Schedule 6.12 so long as such amendment
occurs by written notice to Foothill not less than 30 days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as, at the
time of such written notification, Borrower provides any financing statements
or fixture filings necessary to perfect and continue perfected Foothill's
security interests in such assets and also provides to Foothill a Collateral
Access Agreement.
6.13 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to have a Material Adverse Change.
6.14 Employee Benefits.
(a) Promptly, and in any event within 10 Business Days after
Borrower or any of its Subsidiaries knows or has reason to know that an ERISA
Event has occurred that reasonably could be expected to result in a Material
Adverse Change, a written statement of the chief financial officer of Borrower
describing such ERISA Event and any action that is being taking with respect
thereto by Borrower, any such Subsidiary or ERISA Affiliate, and any action
taken or threatened by the IRS, Department of Labor, or PBGC. Borrower or such
Subsidiary, as applicable, shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor, (ii)
promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by Borrower, any of its
Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with
respect to such request, and (iii) promptly, and in any event within 3
Business Days after receipt by Borrower, any of its Subsidiaries or, to the
knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer
a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where any such
plan is not in writing, complete description thereof) (and if applicable,
related trust agreements or other funding instruments) and all amendments
thereto, all written interpretations thereof and written descriptions thereof
that have been distributed to employees or former employees of Borrower or its
Subsidiaries; (ii) the most recent determination letter issued by the IRS with
respect to each Benefit Plan; (iii) for the three most recent plan years, annual
reports on Form 5500 Series required to be filed with any governmental agency
for each Benefit Plan; (iv) all actuarial reports prepared for the last three
plan years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with
the aggregate amount of the most recent annual contributions required to be made
by Borrower or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former
employees of Borrower or its Subsidiaries under any Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable
under any leases to which Borrower is a party or by which Borrower's properties
and assets are bound, unless such payments are the subject of a Permitted
Protest. To the extent that Borrower fails timely to make payment of such
rents and other amounts payable when due under its leases, Foothill shall be
entitled, in its discretion, to reserve an amount equal to such unpaid amounts
against the Borrowing Base.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not do any of the following without Foothill's prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in
an increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, and (iv) to the extent
that Indebtedness that is refinanced was subordinated in right of payment to
the Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly
or indirectly, any Lien on or with respect to any of the Real Property and the
Real Property Collateral; and create, incur, assume, or permit to exist,
directly or indirectly, any Lien on or with respect to any of its property or
assets other than its Real Property, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted Liens (
including Liens that are replacements of Permitted Liens to the extent that
the original Indebtedness is refinanced under Section 7.1(d) and so long as
the replacement Liens only encumber those assets or property that secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or
any substantial part of its property or assets.
7.4 Disposal of Assets. Sell, lease, assign, transfer, or
otherwise dispose of any of Borrower's properties or assets other than sales
of Inventory to buyers in the ordinary course of Borrower's business as
currently conducted.
7.5 Change Name. Change Borrower's name, FEIN, corporate
structure (within the meaning of Section 9-402(7) of the Code), or identity, or
add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Foothill.
7.7 Nature of Business. Make any change in the principal nature
of Borrower's business.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or concerning
Indebtedness permitted under Sections 7.1(b), (c), or (d).
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory
on bill and hold, sale or return, sale on approval, or other conditional terms
of sale.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently existing,
or at any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Foothill
information regarding the Collateral or Borrower's financial condition.
7.13 Investments. Directly or indirectly make, acquire, or incur
any liabilities (including contingent obligations) for or in connection with (a)
the acquisition of the securities (whether debt or equity) of, or other
interests in, a Person, (b) loans, advances, capital contributions, or
transfers of property to a Person, or (c) the acquisition of all or
substantially all of the properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to Borrower than would be obtained in an arm's length
transaction with a non-Affiliate.
7.15 Suspension. Suspend or go out of a substantial portion of
its business.
7.16 Intentionally Deleted.
7.17 Use of Proceeds. Use the proceeds of the Advances and the
Term Loan made hereunder for any purpose other than (i) on the Closing Date, (y)
to repay in full the outstanding principal, accrued interest, and accrued fees
and expenses owing to Existing Lender, and (z) to pay transactional costs and
expenses incurred in connection with this Agreement, and (ii) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory
and Equipment with Bailees. Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests and also provides to Foothill
a Collateral Access Agreement with respect to such new location. The Inventory
and Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent.
7.19 No Prohibited Transactions Under ERISA. Directly or
indirectly:
(a) engage, or permit any Subsidiary of Borrower to
engage, in any prohibited transaction which is reasonably likely to result in
a civil penalty or excise tax described in Sections 406 of ERISA or 4975 of
the IRC for which a statutory or class exemption is not available or a private
exemption has not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail,
to pay timely required contributions or annual installments due with respect
to any waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail,
to make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail,
to pay any required installment or any other payment required under Section
412 of the IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend,
a Plan resulting in an increase in current liability for the plan year such
that either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $100,000.
7.20 Financial Covenants. Fail to maintain:
(a) Tangible Net Worth. Tangible Net Worth of at least
$4,269,000 as of the fiscal quarter ended December 31, 1997, $4,527,000 as of
the fiscal quarter ended March 31,1998, $4,503,000 as of the fiscal quarter
ended June 30, 1998, $4,862,000 as of the fiscal quarter ended September 30,
1998 and $4,599,000 as of the fiscal quarter ended December 31, 1998 and at
the end of each fiscal quarter thereafter, in each case, measured on a fiscal
quarter-end basis until Foothill shall determine, based upon the financial
projections provided by Borrower, a new number for Tangible Net Worth; and
(b) Net Earnings From Operations Before Interest, Taxes,
Depreciation and Amortization. Borrower shall, calculated on a rolling
twelve (12) month basis, maintain Net Earnings From Operations Before Interest,
Taxes, Depreciation and Amortization measured at the end of each fiscal quarter
of $2,066,000 as of the fiscal quarter ended December 31, 1997, $2,154,000 as
of the fiscal quarter ended March 31, 1998, $1,995,000 as of the fiscal quarter
ended June 30, 1998, $2,002,000 as of the fiscal quarter ended September 30,
1998 and $1,962,000 as of the fiscal quarter ended December 31, 1998 and at
the end of each fiscal quarter thereafter until Foothill shall determine,
based upon the financial projections provided by Borrower, a new number for
Net Earnings From Operations Before interest, Taxes, Depreciation and
Amortization; and
(c) Hardparts to Total Inventory. The aggregate dollar
value of all hardparts, consisting of truck accessories, suspension parts,
body filler and related parts, exhaust parts, brake parts, alernators, starters
and cores, valued at the lowest of cost, market or liquidation value (as
determined by the quarterly inventory appraisal referred to in Section 2.1(a))
shall at no time be greater than thirty (30%) percent of the value of all
Inventory valued at the lowest of cost, market or liquidation value (as
determined by the quarterly inventory appraisal referred to in Section 2.1(a)).
7.21 Capital Expenditures. Make capital expenditures in any
fiscal year in excess of $750,000.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrower fails to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in Section 6.2 of this
Agreement within five (5) days of the date for such action, or if Borrower
fails to perform, keep, or observe any term, provision, condition, covenant,
or agreement contained in Section 6.3, 6.4, 6.7, 6.9,6.12 or 6.15 of this
Agreement within fifteen (15) days of the date for such action or if Borrower
fails to perform, keep, or observe any term, provision, condition, covenant,
or agreement contained in any other provision of Agreement or in any of the
Loan Documents, or in any other present or future agreement between Borrower
and Foothill;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to the
institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within 45
calendar days of the date of the filing thereof; provided, however, that,
during the pendency of such period, Foothill shall be relieved of its obligation
to extend credit hereunder; (d) an interim trustee is appointed to take
possession of all or a substantial portion of the properties or assets of, or
to operate all or any substantial portion of the business of, Borrower;
or (e) an order for relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities becomes a
Lien, whether choate or otherwise, upon any of Borrower's properties or assets
and the same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons and such default (a) occurs
at the final maturity of the obligations thereunder, or (b) results in a right
by such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of Borrower,
or if any such warranty or representation is withdrawn;
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by
operation of law or by the guarantor or other third Person thereunder, or any
such guarantor or other third Person becomes the subject of an Insolvency
Proceeding;
8.14 If Borrower fails to implement, install and have fully
operational, to the satisfaction of Foothill, a point of sale system in each
of its locations on or before February 15, 1998, provided however, that a
violation of this Section will be the basis of an increase in the Interest
Rate set forth in Section 2.6(a) to three (3) percentage points above the
Reference Rate; or
8.15 If Borrower fails to implement, install and have fully
operational, to the satisfaction of Foothill, a perpetual inventory reporting
and tracking system on or before February 15, 1998, provided however, that a
violation of this Section will be the basis of an increase in Interest Rate
set forth in Section 2.6(a) to three (3) percentage points above the Reference
Rate.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for
the benefit of Borrower under this Agreement, under any of the Loan Documents,
or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Personal Property
Collateral or the Real Property Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Borrower's Loan Account with only the
net amounts received by Foothill in payment of such disputed Accounts after
deducting all Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for Foothill, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Personal Property Collateral if Foothill so requires,
and to make the Personal Property Collateral available to Foothill as Foothill
may designate. Borrower authorizes Foothill to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of
the Personal Property Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or Lien that in Foothill's
determination appears to conflict with its security interests and to pay all
expenses incurred in connection therewith. With respect to any of Borrower's
owned or leased premises, Borrower hereby grants Foothill a license to enter
into possession of such premises and to occupy the same, without charge, for
up to 120 days in order to exercise any of Foothill's rights or remedies
provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the Code),
set off and apply to the Obligations any and all (i) balances and deposits of
Borrower held by Foothill (including any amounts received in the Blocked
Accounts), or (ii) indebtedness at any time owing to or for the credit or the
account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Blocked
Accounts, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Foothill is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature,
as it pertains to the Personal Property Collateral, in completing production
of, advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall
inure to Foothill's benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower's premises) as Foothill determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be
present at any such sale;
(k) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(1) Foothill shall give Borrower and each holder of
a security interest in the Personal Property Collateral who has filed with
Foothill a written request for notice, a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Personal Property
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least 5 days
before the date fixed for the sale, or at least 5 days before the date on or
after which the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market. Notice
to Persons other than Borrower claiming an interest in the Personal Property
Collateral shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by publishing a notice one time
at least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to Borrower.
When Foothill Deems Itself Insecure or after the the occurrence of an
Event of Default, Foothill may, at its election, require Borrower to grant to
Foothill a Mortgage on the Real Property. Borrower agrees to grant and
provide such Mortgage promptly upon such request and hereby authorizes
Foothill to sign Borrower's name to and file any necessary document to effect
the grant of such Mortgage in the event Borrower fails to comply with such
request for a period of thirty (30) days after receipt of such request.
9.2 Remedies Cumulative. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and
no waiver by Foothill of any Event of Default shall be deemed a continuing
waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to
make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill may
do any or all of the following: (a) make payment of the same or any part
thereof; (b) set up such reserves in Borrower's Loan Account as Foothill
deems necessary to protect Foothill from the exposure created by such failure;
or (c) obtain and maintain insurance policies of the type described in Section
6.10, and take any action with respect to such policies as Foothill deems
prudent. Any such amounts paid by Foothill shall constitute Foothill Expenses.
Any such payments made by Foothill shall not constitute an agreement by Foothill
to make similar payments in the future or a waiver by Foothill of any Event of
Default under this Agreement. Foothill need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9-207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage thereto occurring or
arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or destruction
of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower shall pay, indemnify, defend, and
hold Foothill, and each of its respective officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified Person")
harmless (to the fullest extent permitted by law) from and against any and
all claims, demands, suits, actions, investigations, proceedings, and damages,
and all reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against,
imposed upon, or incurred by any of them in connection with or as a result of
or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document,
or the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and
the repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
If to Borrower: Aid Auto Stores, Inc.
275 Grand Boulevard
Westbury, New York 11590-0281
Attn: Philip L. Stephen
Fax No. 516-338-4143
Ames Automotive Warehouse, Inc.
275 Grand Boulevard
Westbury, New York 11590-0281
Attn: Philip L. Stephen
Fax No. 516-338-4143
with copies to: Cowan, Liebowitz & Latman, P.C.
1133 Avenue of the Americas
New York, New York 10036-6799
Attn: Lewis R. Cowan, Esq.
Fax No. 212-790-9300
If to Foothill: FOOTHILL CAPITAL CORPORATION
60 State Street
Suite 1150
Boston, Massachusetts 02109
Attn: Business Finance Division Manager
Fax No. 617-722-9493
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given
to the other. All notices or demands sent in accordance with this Section 12,
other than notices by Foothill in connection with Sections 9504 or 9505 of the
Code, shall be deemed received on the earlier of the date of actual receipt or
3 days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when deposited in the mail or personally delivered,
or, where permitted by law, transmitted telefacsimile or other similar method
set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN
THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF
NEW YORK. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH OF BORROWER
AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
4 months after they are delivered to or received by Foothill, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or
any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder and no consent
or approval by Borrower is required in connection with any such assignment.
Foothill reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights
and benefits hereunder. In connection with any such assignment
or participation, Foothill may disclose all documents and information which
Foothill now or hereafter may have relating to Borrower or Borrower's business.
To the extent that Foothill assigns its rights and obligations hereunder to a
third Person, Foothill thereafter shall be released from such assigned
obligations to Borrower and such assignment shall effect a novation between
Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may
be executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one
and the same Agreement. Delivery of an executed counterpart of this Agreement
by telefacsimile shall be equally as effective as delivery of an original
executed counterpart of this Agreement. Any party delivering an executed
counterpart of this Agreement by telefacsimile also shall deliver an original
executed counterpart of this Agreement but the failure to deliver an original
executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared
to be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money
or transfers of property (collectively, a "Voidable Transfer"), and if
Foothill is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that
Foothill is required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of Foothill related thereto, the
liability of Borrower or such guarantor automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in New York, New York.
Aid Auto Stores, Inc.,
a Delaware corporation
By:/s/ Philip L. Stephen
----------------------------
Philip L. Stephen
Title: President
Ames Automotive Warehouse, Inc.,
a New York corporation
By:/s/Philip L. Stephen
----------------------------
Philip L. Stephen
Title: President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:/s/ Chris McDonald
--------------------------------
Chris McDonald
Title:Senior Vice President
<PAGE>
Schedule E-1 Eligible Inventory Locations and
Schedule 6.12 Location of Inventory and Equipment
275 Grand Boulevard
Westbury, New York 11590
42-01 Northern Boulevard
Long Island City, New York 11101
219-02 Linden Boulevard
Cambria Heights, New York 11411
307 Central Avenue
White Plains, New York 10606
7721 Flatlands Avenue
Brooklyn, New York 11236
472 Union Avenue
Brooklyn, New York 11236
2829 Richmond Avenue
Staten Island, New York 10314
8635 18th Avenue
Brooklyn, New York 11229
171 23-25 Hillside Avenue
Jamaica, New York 11432
2726 Merrick Road
Bellmore, New York 11710
160 Hicksville Road
Bethpage, New York 11714
1195 Sunrise Highway
Copiague, New York 11726
1919 Hempstead Turnpike
East Meadow, New York 11554
199 Glen Street
Glen Cove, New York 11542
468 Peninsula Boulevard
Hempstead, New York 11550
1251 Deer Park Avenue
North Babylon, New York 11703
3500 Long Beach Road
Oceanside, New York 11571
246 Rockaway Avenue
Valley Stream, New York 11580
323 Hempstead Turnpike
West Hempstead, New York 11552
440 Rockaway Turnpike
Cedarhurst, New York
428 Grand Street
Jersey City, New Jersey
4026 Boston Post Road
Bronx, New York
2750 Hylan Boulevard
Staten Island, New York 10306
<PAGE>
SCHEDULE P-1
PERMITTED LEINS
- -----------------------------------------------------------------------------
Secured Party Date Number Collateral/Comments
- -------------------------- -------- ----------- ---------------------
Wasco Funding Corp. 6/25/96 96PQ09320 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 12/4/92 251631 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Vanguard Financial 12/11/95 247210 Specific Equipment
Service Corp.
1110 North Main Street
Lombard, IL 60148
- -----------------------------------------------------------------------------
Wasco Funding Corp. 4/15/96 074720 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Exide Corporation 4/24/96 081726 Specific Equipment
645 Penn Street
Reading, PA 19601
- -----------------------------------------------------------------------------
Wasco Funding Corp. 6/24/96 125845 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
USL Capital Coporation 9/23/96 188063 Specific Equipment
733 Front Street
San Francisco, CA 94111
- -----------------------------------------------------------------------------
Xerox Corporation 9/25/96 190101 Specific Equipment
350 S. Northwest Hwy.
Park Ridge, IL 60068
- -----------------------------------------------------------------------------
Caterpillar Financial 11/14/96 226358 Specific Equipment
Services Corporation
10440 Little Patuxent Pkwy.
Columbia, MD 21044
- -----------------------------------------------------------------------------
Wasco Funding Corp. 4/16/96 96PK05000 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 6/25/96 96PK08286 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 2/9/93 93-002703 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 4/16/96 96-005911 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 7/8/96 96-010036 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
USL Capital Corporation 9/24/96 96-014153 Specific Equipment
733 Front Street
San Francisco, CA 9411
- -----------------------------------------------------------------------------
Xerox Corporation 10/4/96 96-015050 Specific Equipment
350 S. Northwest Hwy.
Park Ridge, IL 60068
- -----------------------------------------------------------------------------
Caterpillar Financial 11/22/96 96-17732 Specific Equipment
Services Corporation
10440 Little Patuxent Pkwy
Columbia, MD 21044
- -----------------------------------------------------------------------------
Wasco Funding Corp. 4/17/96 96-761 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 6/25/96 96-1291 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Wasco Funding Corp. 7/12/96 1708877 Specific Equipment
150 East 58th Street
New York, NY 10155
- -----------------------------------------------------------------------------
Vanguard Financial 12/11/95 95-20512 Specific Equipment
Services Group
1110 North Main Street
Lombard, IL 60148
- -----------------------------------------------------------------------------
<PAGE>
Schedule R-1 Real Property Collateral
472 Union Avenue, Brooklyn, New York 11236 which property becomes Real
Property Collateral at such time as Foothill Deems Itself Insecure or an
Event of Default exists and Foothill so requests.
<PAGE>
Schedule 5.8
List of Aid Auto Stores, Inc. Subsidiaries
-------------------------------------------
1. Ames Automotive Warehouse, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
2. Perfect Choice Automotive Products, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
3. Aid Flatlands Avenue, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
4. White Plains Aid, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100 shares issued to Aid Auto Stores, Inc.
5. Bellmore Aid, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
6. Bethpage Superstore Aid Auto, Inc. ( N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
7. North Babylon Superstore Aid Auto, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
8. Oceanside Superstore Aid Auto, Inc. ( N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
9. Jersey City Aid Auto, Inc. (N.J. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
10. Hillside Avenue AId, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
11. Glen Cove Superstores Aid Auto, Inc. ( N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
12. Aid 1715 Flatbush, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Aid Auto Stores, Inc.
13. Cambria Heights Aid, Inc. (N.Y. corp.)
200 Authorized Shares, no par value
100% owned by Philip L. Stephen
There are no securities convertible into subsidiary stock.
<PAGE>
SCHEDULE 5.10
(a) Mampe v. Aid Auto Stores, Inc.
Supreme Court Suffolk County, New York
Case No. 96/12999
Answer served on behalf of Patchogue Aid, Inc. who was
incorrectly sued as Aid Auto Stores, Inc.
(b) Yakov and Irina Burakovsky v. PJI Inc./Aid Auto Stores, Inc.
Civil Court, Hudson County, New Jersey
Case Number 031360/89
Stipulation of Dismissal filed 1/25/91
(c) Frank Santangello v. Aid Auto Stores, Inc.
Supreme Court Suffolk County, New York
Case Number 0311773/96
This case is being handled by Michael F. Manning, Esq.,
and is covered by insurance under Nuby's Auto, Inc.'s
policy.
(d) The following is a list of judgements and pending
litigations which appeared on the UCC-1 search
performed by Foothill:
1. Debtor: Aid Auto Stores, Inc.
Creditor: M Eagles Tool Warehouse, Inc.
Amount: $2,399.49
Venue: Essex Special Civil Part
Judgement No.: JC00277-6-90
Date: 10/11/90
2. Debtor: Star Auto Parts and Newmark Hardware,
Inc. d/b/a Aid Auto
Creditor: B.A.P. Automotive Warehouse, Inc.
Amount: $35,000.00
Venue: Essex Superior Court
Judgement No.: J-042255-93
Date: 4/26/93
3. Defendant: Aid Auto
Plaintiff: ABC Loss & Fire Prevention Corp.
Venue: Essex Special Civil Part
Case No.: SC-00099001-00 SC
Date: 5/27/88
Amount: $199.00
4. Defendant: Aid Auto and Joe Terracone
Plaintiff: The Citizen Publishing Inc.
Venue: Union Special Civil Part
Case No.: SC-004-6030-00 DC
Date: 7/28/88
Amount: $772.00
<PAGE>
SCHEDULE 5.13
A 401k plan is to be instituted in 1998
<PAGE>
EXHIBIT C-1
(Form of Compliance Certificate)
Aid Auto Stores, Inc.
275 Grand Boulevard
Westbury, New York 11590
and
Ames Automotive Warehouse, Inc.
472 Union Avenue
Brooklyn, New York 11211
To: Foothill Capital Corporation
11111 Santa Monica Boulevard, Suite 1500
Los Angeles, CA 90025-3333
Attn: Business Finance Division Manager
Re: Compliance Certificate dated ________________, 199_
Ladies and Gentlemen:
Reference is made to that certain Loan and Security Agreement, dated as of
(as the same may from time to time be amended, modified, supplemented
or restated, the "Loan Agreement") between *A* ("Borrower") and Foothill Capital
Corporation ("Foothill"). The initially capitalized terms used in this
Compliance Certificate have the meaning set forth in the Loan Agreement
unless specifically defined herein.
Pursuant to Section 6.3 of the Loan Agreement, the undersigned officer of
Borrower hereby certifies that:
1. The financial information of Borrower furnished in Schedule
1 attached hereto, has been prepared in accordance with GAAP (except for year-
end adjustments and the lack of footnotes, in the case of financial statements
delivered under Section 6.3(a) of the Loan Agreement) and fairly presents the
financial condition of Borrower.
2. Such officer has reviewed the terms of the Loan Agreement
and has made, or caused to be made under his/her supervision, a review in
reasonable detail of the transactions and condition of Borrower during the
accounting period covered by financial statements delivered pursuant to
Section 6.3 of the Loan Agreement.
3. Such review has not disclosed the existence on and as of
the date hereof, and the undersigned does not have knowledge of the existence
as of the date hereof of any event or condition that constitutes a Default or
Event of Default, except for such conditions or events listed on Schedule 2
attached hereto, specifying the nature and period of existence thereof and
what action Borrower has taken, is taking or proposes to take with respect
thereto.
4. Borrower is in timely compliance with all representations,
warranties, and covenants set forth in the Loan Agreement and the other Loan
Documents, except as set forth on Schedule 2 attached hereto. Without limiting
the generality of the foregoing, Borrower is in compliance with the covenants
contained in Section 7.20 of the Loan Agreement as demonstrated on Schedule 3
hereof.
IN WITNESS WHEREOF, this Compliance Certificate is executed by the
undersigned this________ day of__________________ , 199_.
Aid Auto Stores, Inc.,
a Delaware corporation
By
--------------------------
Name: Philip L. Stephen
Title: President
Ames Automotive Warehouse, Inc.,
a New York corporation
By
-------------------------------------
Name: Philip L. Stephen
Title: President
<PAGE>
Exhibit 23 (a)
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We have issued our reports dated April 4, 1997, accompanying the consolidated
financial statements of Aid Auto Stores, Inc. and Subsidiaries appearing in
the 1996 Annual Report of the Company to its shareholders and accompanying
the schedules included in the Annual Report on Form 10-K for the year ended
December 31, 1996 which are incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in the Registration
Statement of the aforementioned reports and to the use of our name as it
appears under the caption "Experts."
GRANT THORNTON LLP
New York, New York
October 20, 1997
