SEC Info - Fleetpride Inc/AL, et al. - ‘424B3’ on 11/15/99

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Fleetpride Inc/AL, et al. – ‘424B3’ on 11/15/99

On: Monday, 11/15/99 · Accession #: 898430-99-4279 · File #s: 333-75887, -01, -02, -03, -04, -05, -06, -07, -08, -09, -10, -11, -12, -13, -14, -15, -16, -17, -18, -19, -20, -21, -22, -23, -24, -25, -26, -27, -28, -29, -30, -31, -32, -33, -34, -35, -36, -37, -38, -39

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/15/99  Fleetpride Inc/AL                 424B3                  1:1.0M                                   Donnelley R R & S… 05/FA
          City Truck & Trailer Parts of Alabama Inc
          City Truck & Trailer Parts of Alabama LLC
          City Truck & Trailer Parts of Tennessee Inc
          City Friction Inc
          Truck & Trailer Parts Inc
          Truckparts Inc
          Associated Brake Supply Inc
          Associated Truck Center Inc
          Onyx Distribution Inc
          Associated Truck Parts of Nevada Inc
          Freeway Truck Parts of Washington Inc
          Tisco Inc
          Tisco of Redding Inc
          City Truck Holdings Inc
          Active Gear LLC
          Superior Trucks & Auto Supply Inc
          QDSP Holdings Inc
          Quality Distribution Service Partners Inc
          Automotive Sales Co Inc
          City Spring Works Inc
          Fleetpride Inc
          Holt Inc
          SLM Power Group Inc
          Truck City Parts Inc
          Universal Joint Sales Co Inc
          Wheatley Truck Parts Inc
          CB Acquisition Sub Inc
          New England Truck & Auto Service Inc
          TBS Inc/AZ
          Four T Sales & Service Inc
          Stats Remanufacturing Center Inc
          Power Export Distrubuting Co
          Power Equipment International Inc
          Parts Management Co
          Parts Holding Co
          Specialized Sales & Service Inc
          Parts Distributing Co Ltd
          Wheels & Brakes Inc
          Specrite Brake Co

Prospectus — Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Final Prospectus                                     423   1.71M

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (Word, et al.) Accounts receivable Asset Sales Available Information Balance Sheets at December 31, 1997 and 1998 Board of Directors Book-Entry; Delivery; Form and Transfer Business Capitalization Cash and cash equivalents Cash Equivalents Change of Control City Truck Combined Balance Sheets at December 31, 1997 and 1998 Combined Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998 Combined Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998 Combined Statements of Income and Stockholders' Equity for the Years Ended December 31, 1996 and 1997 and for the nine month period ended September 30, 1998 Combined Statements of Income for the Three Years Ended December 31, 1996, 1997 and 1998 Company History Conditions Connecticut Driveshaft Consolidated Consolidated Balance Sheets at December 31, 1997 and 1998 Consolidated Balance Sheets at January 31, 1998 and 1999 Consolidated Statements of Cash Flows for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998 Consolidated Statements of Income for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998 Consolidated Statements of Income for the Years Ended December 31, 1996, 1997 and 1998 Consolidated Statements of Income for the Years Ended January 31, 1997, 1998 and 1999 Consolidated Statements of Stockholders' Equity for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998 Covenants Current Assets Current liabilities Deferred income taxes Definitions Depreciation Description of Credit Facility Description of Notes Events of Default Exchange Agent Exchange Offer, The Experts Forward-Looking Statements Gross profit Guaranteed Delivery Procedures Hda Hda Parts System, Inc Income from operations Income Taxes Incurrence of Additional Indebtedness and Disqualified Capital Stock Index to Financial Statements Interest Interest expense Inventories Inventory Legal Defeasance and Covenant Defeasance Legal Matters Liquidated Damages Liquidity and Capital Resources Management Management's Discussion and Analysis of Financial Condition and Results of Operations Market Data Material Relationships and Transactions Material U.S. Federal Income Tax Consequences Material U.S. Federal Income Tax Consequences of the Exchange Net income Notes to Combined Financial Statements Notes to Consolidated Financial Statements Notes to Financial Statements Notes to the Unaudited Financial Statements Notes to Unaudited Combined Financial Statements Notes to Unaudited Consolidated Financial Statements Optional Redemption Other assets Plan of Distribution Principal Stockholders Procedures for Tendering Property and Equipment Reg S Temporary and Reg S Permanent Global Notes Restricted Payments Risk Factors Sales Selected Historical Financial and Operating Data Senior Subordinated Notes Statement of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998 STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996, 1997 and 1998 Statements of Income and Retained Deficit for the Years Ended December 31, 1996, 1997 and 1998 Statements of Income and Retained Earnings for the Years Ended December 31, 1996, 1997 and 1998 Stockholders' equity Subordination Summary Summary Pro Forma Financial Data Suppliers The Exchange Offer Transfers of Interests in Global Notes for Certificated Notes Transfers of Interests in One Global Note for Interests in Another Global Note Unaudited Combined Statement of Cash Flows for the Period from January 1, 1999 to May 28, 1999 Unaudited Combined Statement of Cash Flows for the Six Months Ended June 30, 1999 Unaudited Combined Statement of Cash Flows for the Three Months Ended December 31, 1998 Unaudited Combined Statement of Changes in Stockholders' Equity for the Period Ended June 30, 1999 Unaudited Combined Statement of Income for the Six Months Ended June 30, 1999 Unaudited Consolidated Income Statement for the Six Months Ended June 30, 1999 Unaudited Consolidated Statement of Cash Flows for the Five Months Ended June 30, 1999 Unaudited Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1999 Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Five Months Ended June 30, 1999 Unaudited Consolidated Statement of Income for the Five Months Ended June 30, 1999 Unaudited Consolidated Statement of Operations for the Six Months Ended June 30, 1999 Unaudited Consolidated Statements of Cash Flow for the Six Months Ended June 30, 1999 and 1998 Unaudited Notes to Financial Statements Unaudited Pro Forma Financial Data Unaudited Statement of Cash Flows for the Period from January 1, 1999 to April 20, 1999 Unaudited Statement of Cash Flows for the Period from January 1, 1999 to June 7, 1999 Use of Proceeds Vantage Parts We benefit from the following competitive strengths: Withdrawal of Tenders Year 2000 Issue 1998
1	1st Page - Filing Submission
"	Hda Parts System, Inc
3	Summary
"	The Exchange Offer
"	Procedures for Tendering
9	We benefit from the following competitive strengths:
10	Summary Pro Forma Financial Data
11	Risk Factors
18	Forward-Looking Statements
"	Market Data
24	Guaranteed Delivery Procedures
25	Withdrawal of Tenders
"	Conditions
27	Liquidated Damages
28	Exchange Agent
30	Company History
32	Use of Proceeds
"	Capitalization
33	Unaudited Pro Forma Financial Data
49	Selected Historical Financial and Operating Data
50	Management's Discussion and Analysis of Financial Condition and Results of Operations
52	Sales
"	Gross profit
"	Income from operations
"	Interest expense
"	Net income
54	Liquidity and Capital Resources
56	Year 2000 Issue
58	Business
63	Suppliers
67	Management
70	Principal Stockholders
71	Material Relationships and Transactions
76	Description of Credit Facility
"	Interest
77	Covenants
"	Events of Default
78	Description of Notes
81	Subordination
82	Optional Redemption
83	Change of Control
84	Asset Sales
87	Restricted Payments
89	Incurrence of Additional Indebtedness and Disqualified Capital Stock
90	Consolidated
97	Legal Defeasance and Covenant Defeasance
100	Definitions
119	Book-Entry; Delivery; Form and Transfer
122	Reg S Temporary and Reg S Permanent Global Notes
123	Transfers of Interests in One Global Note for Interests in Another Global Note
124	Transfers of Interests in Global Notes for Certificated Notes
126	Material U.S. Federal Income Tax Consequences of the Exchange
"	Material U.S. Federal Income Tax Consequences
127	Plan of Distribution
"	Legal Matters
128	Experts
129	Available Information
130	Index to Financial Statements
136	Consolidated Balance Sheets at December 31, 1997 and 1998
137	Consolidated Statements of Income for the Years Ended December 31, 1996, 1997 and 1998
138	Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998
140	Notes to Consolidated Financial Statements
142	Cash and cash equivalents
"	Inventories
143	Income Taxes
145	Senior Subordinated Notes
150	Current Assets
"	Current liabilities
151	Hda
156	Unaudited Consolidated Income Statement for the Six Months Ended June 30, 1999
157	City Truck
158	Unaudited Consolidated Statements of Cash Flow for the Six Months Ended June 30, 1999 and 1998
159	Item 1. Notes to Unaudited Consolidated Financial Statements
"	Property and Equipment
167	Notes to Combined Financial Statements
"	Inventory
174	Consolidated Statements of Income for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998
175	Consolidated Statements of Stockholders' Equity for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998
176	Consolidated Statements of Cash Flows for the Years Ended December 27, 1996, December 26, 1997 and December 31, 1998
185	Vantage Parts
"	Combined Balance Sheets at December 31, 1997 and 1998
186	Combined Statements of Income for the Three Years Ended December 31, 1996, 1997 and 1998
194	Unaudited Combined Statement of Cash Flows for the Period from January 1, 1999 to May 28, 1999
195	Notes to Unaudited Combined Financial Statements
199	Combined Statements of Income and Stockholders' Equity for the Years Ended December 31, 1996 and 1997 and for the nine month period ended September 30, 1998
201	Accounts receivable
"	Other assets
209	Connecticut Driveshaft
210	Notes to Financial Statements
"	Depreciation
223	Stockholders' equity
232	Unaudited Combined Statement of Cash Flows for the Three Months Ended December 31, 1998
236	Balance Sheets at December 31, 1997 and 1998
238	Statement of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998
244	Unaudited Statement of Cash Flows for the Period from January 1, 1999 to April 20, 1999
245	Unaudited Notes to Financial Statements
250	Combined Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and 1998
251	Combined Statement of Changes in Stockholders' Equity for the Years Ended December 31, 1996, 1997 and 1998
256	Deferred income taxes
257	1998
259	Unaudited Combined Statement of Income for the Six Months Ended June 30, 1999
260	Unaudited Combined Statement of Cash Flows for the Six Months Ended June 30, 1999
261	Unaudited Combined Statement of Changes in Stockholders' Equity for the Period Ended June 30, 1999
266	Statements of Income and Retained Earnings for the Years Ended December 31, 1996, 1997 and 1998
271	Unaudited Statement of Cash Flows for the Period from January 1, 1999 to June 7, 1999
272	Notes to the Unaudited Financial Statements
275	Consolidated Balance Sheets at January 31, 1998 and 1999
276	Consolidated Statements of Income for the Years Ended January 31, 1997, 1998 and 1999
279	Cash Equivalents
286	Unaudited Consolidated Statement of Income for the Five Months Ended June 30, 1999
287	Unaudited Consolidated Statement of Changes in Stockholders' Equity for the Five Months Ended June 30, 1999
288	Unaudited Consolidated Statement of Cash Flows for the Five Months Ended June 30, 1999
291	Board of Directors
310	Unaudited Consolidated Statement of Operations for the Six Months Ended June 30, 1999
312	Unaudited Consolidated Statement of Cash Flows for the Six Months Ended June 30, 1999
410	Statements of Income and Retained Deficit for the Years Ended December 31, 1996, 1997 and 1998
411	STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1996, 1997 and 1998

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FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION NO. 333-75887
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333-75887-39

PROSPECTUS

HDA PARTS SYSTEM, INC.

OFFER TO EXCHANGE

$100,000,000 principal amount of its

12% senior subordinated notes due 2005,

which have been registered under the Securities Act,

for any and all of its outstanding 12% senior subordinated notes due 2005

Material Terms of the Exchange Offer
------------------------------------

. The exchange offer expires at 5:00 p.m., New York City time, on December 14,
1999, unless extended.

. We will exchange all outstanding notes that are validly tendered and not
validly withdrawn for an equal principal amount of a new series of notes
which are registered under the Securities Act.

. The exchange offer is not subject to any conditions other than that it not
violate applicable law or any applicable interpretation of the staff of the
SEC.

. You may withdraw tenders of outstanding notes at any time before the exchange
offer expires.

. The exchange of notes will not be a taxable event for U.S. federal income tax
purposes.

. We will not receive any proceeds from the exchange offer.

. The terms of the new series of notes are substantially identical to the
outstanding notes, except for transfer restrictions and registration rights
relating to the outstanding notes.

. You may tender outstanding notes only in denominations of $1,000 and multiples
of $1,000.

. Our affiliates may not participate in the exchange offer.

Please refer to "Risk Factors" beginning on page 9 of this document for
a description of the risks you should consider when evaluating this investment.

We are not making this exchange offer in any state where it is not permitted.

Neither the Securities and Exchange Commission nor any state securities
commission has approved of the notes or determined that this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is November 12, 1999.

424B3 2nd Page of 423 TOC 1st Previous Next ↓Bottom Just 2nd
We have not authorized any dealer, salesperson or other person to give any
information or to make any representation other than those contained in this
prospectus. You must not rely upon any information or representation not
contained in this prospectus as if we had authorized it. This prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which it relates, nor does
this prospectus constitute an offer to sell or the solicitation of an offer to
buy securities in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction.

The information in this prospectus is current only as of the date on its
cover, and may change after that date. For any time after the cover date of
this prospectus, we do not represent that our affairs are the same as described
or that the information in this prospectus is correct, nor do we imply those
things by delivering this prospectus to you.

----------------

TABLE OF CONTENTS

[Download Table]

Page
----

Summary.................................................................. 1
Summary Pro Forma Financial Data......................................... 8
Risk Factors............................................................. 9
Forward-Looking Statements............................................... 16
Market Data.............................................................. 16
The Exchange Offer....................................................... 17
Company History.......................................................... 28
Use of Proceeds.......................................................... 30
Capitalization........................................................... 30
Unaudited Pro Forma Financial Data....................................... 31
Selected Historical Financial and Operating Data......................... 47
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 48
Business................................................................. 56
Management............................................................... 65
Principal Stockholders................................................... 68
Material Relationships and Transactions.................................. 69
Description of Credit Facility........................................... 74
Description of Notes..................................................... 76
Material U.S. Federal Income Tax Consequences of the Exchange............ 124
Plan of Distribution..................................................... 125
Legal Matters............................................................ 125
Experts.................................................................. 126
Available Information.................................................... 127
Index to Financial Statements............................................ F-1

424B3 3rd Page of 423 TOC 1st Previous Next ↓Bottom Just 3rd
SUMMARY

The following summary contains basic information about this offering. It does
not contain all the information that may be important to you. For a more
complete understanding of this offering, we encourage you to read this entire
prospectus and the documents we have referred you to.

The Exchange Offer

The Exchange Offer.......... We are offering to exchange our exchange notes
for our outstanding private notes properly
tendered and accepted. You may tender outstanding
notes only in denominations of $1,000 and
multiples of $1,000. We will issue the exchange
notes on or promptly after the exchange offer
expires. As of the date of this prospectus,
$100,000,000 principal amount of private notes is
outstanding.

Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on December 14, 1999, unless
extended, in which case the expiration date will
mean the latest date and time to which we extend
the exchange offer.

Conditions to the Exchange
Offer....................... The exchange offer is not subject to any
conditions other than that it not violate
applicable law or any applicable interpretation
of the staff of the SEC. The exchange offer is
not conditioned upon any minimum principal amount
of private notes being tendered for exchange.

Procedures for Tendering
Private Notes.............. If you wish to tender your private notes for
exchange notes pursuant to the exchange offer you
must transmit to the U.S. Trust Company, National
Association, as exchange agent, on or before the
expiration date, either:

. a computer generated message transmitted
through The Depository Trust Company's
Automated Tender Offer Program system and
received by the exchange agent and forming
a part of a confirmation of book-entry
transfer in which you acknowledge and agree
to be bound by the terms of the letter of
transmittal; or

. a properly completed and duly executed
letter of transmittal, which accompanies
this prospectus, or a facsimile of the
letter of transmittal, together with your
private notes and any other required
documentation, to the exchange agent at its
address listed in this prospectus and on
the front cover of the letter of
transmittal.

If you cannot satisfy either of these procedures
on a timely basis, then you should comply with
the guaranteed delivery procedures described
below. By executing the

424B3 4th Page of 423 TOC 1st Previous Next ↓Bottom Just 4th
letter of transmittal, you will make the
representations to us described under "The
Exchange Offer--Procedures for Tendering."

Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose private notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender your private notes in the
exchange offer, you should contact the registered
holder promptly and instruct the registered
holder to tender on your behalf. If you wish to
tender on your own behalf, you must either (1)
make appropriate arrangements to register
ownership of the private notes in your name or
(2) obtain a properly completed bond power from
the registered holder, before completing and
executing the letter of transmittal and
delivering your private notes.

Guaranteed Delivery
Procedures.................. If you wish to tender your private notes and time
will not permit the documents required by the
letter of transmittal to reach the exchange agent
before the expiration date, or the procedure for
book-entry transfer cannot be completed on a
timely basis, you must tender your private notes
according to the guaranteed delivery procedures
described in this prospectus under the heading
"The Exchange Offer--Guaranteed Delivery
Procedures."

Acceptance of Private Notes
and Delivery of Exchange
Notes...................... Subject to the satisfaction or waiver of the
conditions to the exchange offer, we will accept
for exchange any and all private notes which are
validly tendered in the exchange offer and not
withdrawn before 5:00 p.m., New York City time,
on the expiration date.

Withdrawal Rights........... You may withdraw the tender of your private notes
at any time before 5:00 p.m., New York City time,
on the expiration date, by complying with the
procedures for withdrawal described in this
prospectus under the heading "The Exchange
Offer--Withdrawal of Tenders."

Liquidated Damages.......... We issued the private notes on July 31, 1998 to
the initial purchasers pursuant to a purchase
agreement. At the same time, we entered into a
registration rights agreement with the initial
purchasers requiring us to make the exchange
offer. The registration rights agreement also
required us to:

. cause the registration statement filed with
respect to the exchange offer to be declared
effective by December 28, 1998; and

. consummate the exchange offer by March 13, 1999.

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We failed to comply with the above requirements
and are paying you liquidated damages in the form
of additional interest pursuant to the
registration rights agreement. The rate is
currently $20,000 per week in the aggregate.

Material U.S. Federal
Income Tax Consequences.... The exchange of notes will not be a taxable event
for United States federal income tax purposes.
For a discussion of the material federal income
tax consequences relating to the exchange of
notes, see "Material U.S. Federal Income Tax
Consequences of the Exchange."

Exchange Agent.............. U.S. Trust Company, National Association, the
trustee under the indenture governing the private
notes, is serving as the exchange agent.

Consequences of Failure to
Exchange Notes............. If you do not exchange your private notes for
exchange notes, you will continue to be subject
to the restrictions on transfer provided in the
private notes and in the indenture governing the
private notes. In general, the private notes may
not be offered or sold, unless registered under
the Securities Act, except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. We do not currently plan to
register the private notes under the Securities
Act.

Registration Rights
Agreement................... You are entitled to exchange your private notes
for exchange notes with substantially identical
terms. The exchange offer satisfies this right.
After the exchange offer is completed, you will
no longer be entitled to any exchange or
registration rights with respect to your private
notes. Under the circumstances described in the
registration rights agreement, you may require us
to file a shelf registration statement under the
Securities Act.

We explain the exchange offer in greater detail beginning on page 17.

424B3 6th Page of 423 TOC 1st Previous Next ↓Bottom Just 6th
The Exchange Notes

The form and terms of the exchange notes are the same as the form and terms
of the private notes, except that the exchange notes will be registered under
the Securities Act and, therefore, the exchange notes will not be subject to
the transfer restrictions, registration rights and provisions providing for an
increase in the interest rate applicable to the private notes. The exchange
notes will evidence the same debt as the private notes and both the private
notes and the exchange notes, collectively, the "notes", are governed by the
same indenture.

Securities Offered.......... $100.0 million principal amount of 12% senior
subordinated notes due 2005.

Issuer...................... HDA Parts System, Inc.

Maturity Date............... August 1, 2005.

Interest.................... The exchange notes will bear interest at the rate
of 12% per year, payable every six months on
February 1 and August 1, beginning August 1,
1999.

Optional Redemption......... We may redeem the exchange notes, in whole or in
part, on or after August 1, 2002 at the
redemption prices set forth in this prospectus,
plus accrued and unpaid interest and liquidated
damages.

In addition, at any time before August 1, 2001,
we may redeem up to $35.0 million of notes
originally issued at 112% of their principal
amount, plus accrued and unpaid interest, with
the net cash proceeds of one or more public
offerings of equity of our company; provided
however, that at least $65.0 million of notes
remain outstanding after the redemption. For a
more detailed description of the optional
redemption procedures and prices, see
"Description of Notes--Optional Redemption."

Guarantees.................. If we cannot make payments on the notes when due,
our guarantors must make them instead. The
guarantors will consist of our parent company and
all of our current and future domestic
subsidiaries. Our guarantors will fully and
unconditionally guarantee the notes on a joint
and several basis.

Ranking..................... The exchange notes will rank behind all of our
existing and future senior debt, including
borrowings under the credit facility. The
guarantees will rank behind all of the
guarantors' existing and future senior debt,
including guarantees under the credit facility.
The indenture permits us to incur additional
debt, including senior debt.

As of June 30, 1999 on a pro forma basis, we had
approximately $103.1 million of senior debt
outstanding,

424B3 7th Page of 423 TOC 1st Previous Next ↓Bottom Just 7th
excluding unused commitments of $96.9 million
under the revolving credit facilities. The
guarantors had approximately $103.1 million of
guarantor senior debt outstanding, consisting
solely of guarantees under the revolving credit
facilities and term loan but excluding guarantees
of unused commitments under the revolving credit
facilities.

Change of Control........... Upon a change in our control, we must offer to
repurchase your exchange notes at 101% of their
principal amount, plus accrued and unpaid
interest. If a change of control occurs, we may
not have sufficient funds to repurchase all
exchange notes tendered.

Covenants................... The indenture contains covenants that, among
other things, limit our ability and the ability
of the guarantors to:

. incur more debt;

. prepay other debt or amend debt instruments;

. create liens on assets;

. make investments, loan or advances;

. pay dividends or redeem stock;

. engage in mergers or consolidations;

. change the business we conduct; and

. engage in transactions with affiliates.

In addition, we may be required to offer to
purchase exchange notes at 100% of their
principal amount, plus accrued and unpaid
interest, with the proceeds of asset sales.

Form of Exchange Notes...... The exchange notes will be represented by one or
more permanent global certificates, in fully
registered form, deposited with a custodian for,
and registered in the name of a nominee of, The
Depository Trust Company, as depositary. You will
not receive exchange notes in certificated form
unless one of the events described under the
heading "Book-Entry; Delivery; Form and
Transfer--Transfers of Interests in Global Notes
for Certificated Notes" occurs. Instead,
beneficial interests in the exchange notes will
be shown on, and transfers of these notes will be
effected only through, records maintained in
book-entry form by The Depository Trust Company
and its participants.

Use of Proceeds............. We will not receive any cash proceeds in the
exchange offer.

We explain the exchange notes in greater detail beginning on page 76.

424B3 8th Page of 423 TOC 1st Previous Next ↓Bottom Just 8th
HDA Parts System, Inc.

We believe that we are one of the largest and fastest growing independent
distributors in the highly fragmented $17 billion heavy duty vehicle parts and
repair industry. We distribute parts to over 25,000 customers through 173
branch locations across 31 states. Based on both sales and number of branch
locations, we believe that we are the largest independent distributor in the
nation. Heavy duty vehicles include Class VI through Class VIII commercial
vehicles such as tractor-trailers, waste disposal trucks and large off-road
vehicles used in the mining, construction and agricultural industries. We have
a broad base of customers including national and regional fleets operated by
companies such as Waste Management, Inc., Browning-Ferris Industries, Inc.,
Dole Food, Inc. and Tyson Foods, Inc., and common carrier and rental fleets,
including United Parcel Service of America, Inc., Consolidated Freightways
Corporation, Con-Way Transportation Services, Ryder System, Inc., Roadway
Package System, Inc. and Penske Leasing, Inc. A substantial part of our
business consists of sales of heavy duty vehicle parts to local fleets,
independent repair shops, heavy duty vehicle dealerships and government
entities.

Since our formation in June 1998, we have successfully pursued a strategy to
become the largest national distributor of heavy duty vehicle parts, with a
focus on building a nationwide system of branch locations, primarily through
acquisitions. Since then, we have purchased 14 distributors. As a result of
these acquisitions, we have leading market positions and highly experienced
operating management and have achieved significant economies of scale and
scope. We believe we are well positioned for additional growth both through
acquisitions and new store openings. See "Company History" for additional
details regarding our acquisitions.

Our principal executive offices are located at 520 Lake Cook Road, Deerfield,
Illinois 60015, and our telephone number is (847) 444 -1095.

Industry Overview

Industry sources estimate that the heavy duty vehicle parts and repair
industry generated $17.0 billion in revenues in 1997. An industry source
expects the market for replacement parts, which accounted for the majority of
revenues in the overall heavy duty vehicle parts and repair industry, to grow
17.7% from 1997 to 2002. We believe growth in the heavy duty vehicle parts and
repair industry and growth in market share for full-service independent
distributors like us has been and will continue to be driven by the following
primary factors:

. Expanding fleet of heavy duty vehicles;

. Increased life expectancy of fleet vehicles;

. Increased total truck miles driven annually; and

. Increased outsourcing of parts inventory management by fleet operators.

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Competitive Strengths

We benefit from the following competitive strengths:

. Ability to successfully execute our acquisition strategy;

. Proven ability to grow revenue and profits;

. Purchasing leverage;

. Established customer relationships;

. Superior inventory availability;

. Outstanding customer service; and

. Experienced management team.

Business Strategy

Our strategic objective is to further grow our sales and profits by
capitalizing on the continued growth opportunities in the heavy duty vehicle
parts and repair industry. Our business strategy is to:

. Become the largest national distributor of heavy duty vehicle parts;

. Further reduce cost of products sold;

. Develop distribution and operating efficiencies;

. Achieve benefits from combining complementary operations; and

. Expand relationships with national and regional fleet operators.

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SUMMARY PRO FORMA FINANCIAL DATA

The following summary pro forma financial data were derived from, and should
be read in conjunction with, the more detailed consolidated financial
statements of Holdings and its subsidiaries and the Unaudited Pro Forma
Condensed Financial Data, including in each case, the related notes, included
elsewhere in this prospectus. The summary pro forma financial data gives effect
to the merger, the other acquisitions, equity contributions, the new $150
million revolving credit facility, the term loan and the notes, as if each
transaction had occurred as of January 1, 1998 with respect to income statement
data and as of June 30, 1999 with respect to balance sheet data. The selected
pro forma condensed financial and operating data may not be indicative of our
operating results or financial position that would have been achieved had the
events described above been consummated and should not be construed as
representative of future operating results or financial position.

[Download Table]

Pro Forma Pro Forma
Twelve Months Six Months
Ended Ended
December 31, 1998 June 30, 1999
----------------- --------------
(In thousands)

Income Statement Data:
Sales..................................... $543,315 $284,068
Gross profit.............................. 176,449 93,024
Selling, general and administrative
expenses................................. 143,903 73,854
Operating income.......................... 32,546 19,170
Net interest expense...................... 20,692 10,345
Net income................................ 7,404 5,286

Pro Forma
as of
June 30, 1999
--------------
(In thousands)

Balance Sheet Data:
Cash and cash equivalents................................... $ 5,074
Net working capital (1)..................................... 129,263
Total assets................................................ 459,789
Total debt (including current maturities)................... 203,250
Stockholders' equity........................................ 188,394

[Download Table]

Pro Forma Pro Forma
Twelve Months Six Months
Ended Ended
December 31, 1998 June 30, 1999
----------------- -------------
(In thousands)

Other Data:
Depreciation and amortization................ $14,936 $6,703
Ratio of earnings to fixed charges........... 1.6x 1.8x

--------------------
(1) Net working capital equals current assets less current liabilities.

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RISK FACTORS

Before you invest in these exchange notes, you should consider carefully the
following risk factors, as well as other information contained in this
prospectus.

Our substantial debt could adversely affect our financial health and prevent us
from fulfilling our obligations under the notes.

We have a substantial amount of debt outstanding. As of June 30, 1999, our
pro forma indebtedness, consisting principally of obligations under the
revolving credit facilities, term loan and the private notes, was $203.2
million, and our pro forma capitalization was $391.6 million. The following
chart shows other important pro forma credit statistics:

[Download Table]

Pro Forma
At June 30, 1999
----------------

Total indebtedness...................................... $203.2
Stockholders' equity.................................... 188.4

Our substantial amount of debt could:

. make it more difficult for us to satisfy our obligations under the notes;

. limit our ability to obtain financing for acquisitions, working capital,
capital expenditures and general corporate purposes, or limit our ability
to obtain financing on terms favorable to us;

. require us to dedicate a substantial portion of our cash flow from
operations to pay our interest expense, and under certain conditions, to
repay debt, thereby reducing the availability of our cash flow to fund
operations and future business opportunities; and

. limit our flexibility in reacting to changes in our operating environment
or economic conditions, increasing our vulnerability to a downturn in our
business or the economy generally.

If we are unable to generate a sufficient amount of cash to service our debt,
we may not be able to satisfy our obligations under the notes.

Our ability to repay or refinance our debt will depend on our ability to
generate cash in the future, which will be affected by general economic
conditions and financial, business and other factors, some of which are beyond
our control. Based on currently applicable interest rates, we expect to use
$21.7 million of our annual cash flow to pay the interest and principal on our
debt. Our future cash flow and borrowings under the revolving credit facility
may not be sufficient to meet our obligations. We may need to refinance some or
all of our debt, including these notes, on or before maturity, sell material
assets or operations or raise additional debt or equity capital. These
alternatives may not be available to us on favorable terms or at all.

Your right to receive payments on the notes is subordinated to all of our
existing and future senior debt. After we fulfill our obligations under our
senior debt, we may not have sufficient assets to pay you.

If we or our guarantors' file bankruptcy, liquidate or reorganize or undergo
a similar proceeding, we must use our assets to pay our senior debt in full
before paying you. Because of this obligation to pay the senior debt first, we
may not have sufficient assets to pay any of the amounts due on the notes.

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If we breach the terms of our debt, it could prevent us from fulfilling our
obligations under the notes.

The covenants in the indenture limit our ability to:

. incur more debt;

. prepay other debt or amend debt instruments;

. create liens on assets;

. make investments, loan or advances;

. pay dividends or redeem stock;

. engage in mergers or consolidations;

. change the business we conduct; and

. engage in transactions with affiliates.

Our credit facility also contains restrictive covenants. In addition to
covenants similar to those contained in the indenture, the facility restricts
acquisitions, sale/leaseback transactions and capital expenditures. This
facility also requires us to maintain specified financial ratios and satisfy
specified financial tests. Our ability to meet these financial ratios and
financial tests will depend upon our financial performance and may be affected
by events beyond our control, including prevailing economic, financial and
industry conditions. Our breach of any of these covenants could result in a
default under the indenture or the credit facility, which would permit the
senior lenders or you to declare all amounts borrowed under the credit facility
to be due and payable, and the senior lenders could terminate their commitments
to make further loans under the credit facility. If this occurs, we may not
have sufficient assets to satisfy our obligations to you under the notes. In
addition, if we were unable to repay our debt to our senior lenders, the senior
lenders could proceed against the collateral securing that debt.

Our acquisition growth strategy makes us vulnerable to financing risks and the
challenges of integrating new operations into our own. If we fail to
successfully implement our strategy it could adversely affect our ability to
compete.

Our growth depends principally on our ability to acquire and successfully
integrate heavy duty vehicle parts businesses. We may not be able to identify
additional businesses for acquisition in the future, or these businesses may
not be available at reasonable prices. If we fail to integrate the acquired
businesses successfully or to acquire additional heavy duty vehicle parts
businesses or if we pay increased prices for these businesses, our growth
prospects, financial condition and results of operations could be materially
adversely impacted.

In addition, our acquisition strategy subjects us to the following risks:

. we may require additional personnel, assets and capital, and we may not
be able to expand successfully and operate the acquired companies
profitably;

. we may not anticipate or respond effectively to all of the changing
demands that our expanding operations will have on our management
information and operating systems, and we may experience delays,
disruptions and unanticipated expenses in connection with our acquisition
strategy. If we fail to meet the challenges of our expansion, it could
have a material adverse effect on our results of operations and financial
condition;

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. if we do not have sufficient cash resources to finance the implementation
of our acquisition strategy, our growth could be limited unless we are
able to obtain additional capital through debt or equity financings. We
may not be able to obtain the additional financing we may need for our
acquisition program on favorable terms, or at all; and

. our growth strategy also includes expanding relationships with national
and regional fleet operators, further reducing cost of products sold,
developing distribution and operating efficiencies and achieving benefits
from combining complementary operations. We may not be able to achieve
any of these results.

If we fail to attain any or all of these strategies, it could adversely
affect our sales and our ability to compete.

The growth of our operations will place significant demands on our management.

We will encounter various risks pursuing an acquisition growth strategy,
including:

. our future growth will require our management team to manage our
expanding operations while evaluating, completing and integrating new
businesses; and

. our acquisition strategy will continue to place significant demands on
our management to improve our operational, financial and management
information systems, to develop further the management skills of our
managers and supervisors, and to continue to retain, train, motivate and
effectively manage our employees.

If our management does not respond adequately to the demands, it could
adversely affect our acquisition and growth strategy.

We may be unable to repay the notes if we do not compete successfully within
our industry.

We operate in a highly competitive environment. We compete against local,
regional and national companies in the heavy duty parts and repair industry,
including other independent distributors, original equipment manufacturers and
their authorized dealerships, and independent repair shops. Our competition
risks include the following:

. current and potential competitors may have financial, personnel and other
resources substantially greater than ours to finance acquisition and
development opportunities;

. our competitors may have lower overhead cost structures and may be able
to provide their parts and services at lower rates than us;

. original equipment manufacturers are in a position to offer incentives to
heavy duty vehicle owners to return to their authorized dealerships for
heavy duty vehicle parts and repair services, which could adversely
affect our ability to compete; and

. some owners of leased fleets may have sufficient leverage to purchase
replacement parts directly from component manufacturers or to negotiate
higher volume discounts from us.

If we do not compete successfully within our industry, we may not be able to
satisfy our obligations to you under the notes.

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We depend on our executive officers, key employees and a well trained sales
force and the loss of any of these individuals could adversely affect our
business.

Our performance depends upon the efforts of our key employees, especially our
executive officers and operating management. The loss of any of our executive
officers, operating management or other key employees could have a material
adverse effect on our business. In addition, the successful implementation and
management of our growth and expansion strategies will depend on our ability to
continue to attract and retain qualified personnel. We may not be able to
continue to attract that personnel or to retain key personnel in companies we
acquire.

Heavy duty vehicle parts are specialized, and we depend on a knowledgeable
and experienced sales force to select and sell the proper parts to our
customers. Our ability to grow our business will partially depend upon hiring,
training, motivating and retaining a skilled work force.

The trucking industry is sensitive to economic factors outside of our control
which may affect our sales.

We sell many of our products to customers in industries that experience
fluctuations in demand based on economic conditions, energy prices, consumer
demand and other factors. The trucking industry has historically been highly
cyclical as a result of various economic factors such as:

. excess capacity in the industry;

. competition from other forms of transportation;

. the availability of qualified drivers;

. changes in fuel prices and the supply of fuel;

. increases in fuel or energy taxes;

. interest rate fluctuations;

. insurance costs;

. fluctuations in the resale value of equipment;

. economic recession; and

. downturns in customers' business cycles and shipping requirements.

We have little or no control over these economic or industry specific factors.
We may not be able to increase or maintain our level of sales in periods of
economic stagnation or downturn.

The improvement in parts quality may reduce demand for our products which could
adversely affect our sales.

Improvement in the quality of parts manufactured for heavy duty vehicles and
equipment may extend the useful lives and warranties of those parts and may
reduce demand for our products and services by decreasing the frequency of
replacement or refurbishment of those parts. A reduction in demand for our
products and services could have a material adverse effect on our sales.

424B3 15th Page of 423 TOC 1st Previous Next ↓Bottom Just 15th
If we are not able to obtain an adequate supply of heavy duty vehicle parts, it
could adversely affect our sales.

We purchase heavy duty vehicle parts from a number of component
manufacturers. We have not entered into any franchise agreements or supply
contracts that would assure us a continued supply of parts to sell in the
future. A key component of our business strategy is to maintain a wide
selection of parts. Therefore, our inability to obtain access to parts in
sufficient volumes for our branch locations could impair our strategy. Even
though there are many component manufacturers in the marketplace, we may not be
able to obtain an adequate supply of heavy duty vehicle replacement parts. If
we fail to obtain an adequate supply of heavy duty vehicle replacement parts,
it could have a material adverse effect on our sales. We also remanufacture
used parts for resale to our customers. The used parts we need for
remanufacturing may not be available to us in sufficient quantities in the
future. If we cannot obtain an adequate supply of used parts, the resulting
loss of sales could have a material adverse effect on our profitability. See
"Business--Suppliers" for a more detailed discussion of our supplier
relationships.

We may incur environmental clean-up costs or penalties in the future which
could adversely affect our financial condition and profitability.

Our operations are subject to various federal, state and local environmental
laws, regulations and ordinances. If we fail to comply, or our predecessors
failed to comply, with these environmental laws, we may be subject to civil or
criminal liability. In particular, stringent environmental laws govern the
handling and disposal of chemicals and substances, such as solvents and
lubricants, we commonly use in some of our service and remanufacturing
operations. In addition, some of our facilities operate, or have operated,
above-ground and underground storage tanks for fuels and other substances which
are subject to a variety of environmental laws. If the substances described
above are released into the environment at our facilities or at facilities
where we have arranged for disposal of these substances, we may be subject to
liability for cleaning up contamination which results from those releases.

We may not remain in compliance with applicable environmental laws, and it is
possible that:

. we may incur clean-up costs in the future;

. environmental laws may be revised or amended to our detriment; or

. changes to current environmental laws or enactment of new environmental
laws affecting our business and operations may require further capital
investments or make certain of our operations unprofitable.

We conduct environmental diligence in connection with acquisitions and obtain
indemnities from prior owners, which in some cases are limited by time and
dollar amounts. As a result, we may inherit environmental liabilities not fully
covered by indemnification.

The Year 2000 problem may adversely affect our sales and profitability if we or
our suppliers fail to adequately address our Year 2000 concerns.

We are currently addressing potential Year 2000 issues associated with our
systems and our suppliers' systems. The ability of third parties with whom we
transact business to address adequately their Year 2000 issues is outside of
our control. Failure by us or our suppliers to address adequately our
respective Year 2000 issues may result in lower sales for us and may require us
to bear

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Year 2000 costs and expenses. For a more detailed discussion of our Year 2000
issues, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Year 2000 Issue."

Brentwood and Aurora control our operations and their interests may not be
aligned with yours.

Brentwood and Aurora beneficially own 81.8% of Holdings' equity. As a result,
Brentwood and Aurora are able to exercise significant voting control over us
through their ability to determine the outcome of stockholders' votes
regarding, among other things, the election of all of our directors and the
approval of significant transactions. Holdings' stockholders also are party to
a stockholders' agreement which, among other things, provides for the election
of two of the eight directors. Each of Aurora and Brentwood are entitled to
elect three of the remaining six directors pursuant to the certificates of
designation for Holdings' series C special voting preferred stock and series D
special voting preferred stock, respectively, which constitutes a majority of
the board of directors. There may be conflicts between the interests of equity
holders and note holders. You may expect Brentwood and Aurora to act in the
best interests of equity holders.

State and federal statutes may allow courts, under specific circumstances, to
void the exchange notes and the guarantees and require you to return payments
received from us or the guarantors.

Our obligations under the notes may be subject to review under state or
federal fraudulent transfer laws if we go bankrupt or face other financial
difficulty. Under those laws, a court could void the notes or subordinate the
notes to the obligations due other creditors if the court were to find that
when we issued the notes, we:

. received less than fair consideration or reasonably equivalent value
therefor and were or were rendered insolvent; or

. were engaged in a business or transaction for which our remaining
unencumbered assets constituted unreasonably small capital; or

. intended to incur or believed or reasonably should have believed that we
would incur debts beyond our ability to pay as those debts matured.

In addition, the court could direct the return of any amounts paid under the
notes to us or to a fund for the benefit of our creditors. Moreover, regardless
of the factors identified above, the court could avoid the notes and direct
repayment or subordination if it found that we issued the notes with actual
intent to hinder, delay or defraud our creditors.

A court will likely find that we did not receive fair consideration or
reasonably equivalent value for issuing the notes to the extent that we used
the proceeds to repay obligations incurred when Brentwood acquired its interest
in City Truck, including debt under the revolving credit facility and the
interim securities purchased by Brentwood described on page 53, or otherwise
did not directly benefit from the notes' proceeds. We incurred approximately
$42.0 million in obligations under the revolving credit facility and to
Brentwood when we acquired City Truck.

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In addition, a guarantor's obligations under its guarantee of the notes may
be subject to review under the same laws if a guarantor files bankruptcy or
faces other financial difficulty. In that event, the analysis above would
generally apply. The court could avoid the guarantee and direct the repayment
of amounts paid under the guarantee or subordinate the guarantee to the
obligations due other creditors of the guarantor.

A court will likely find that a guarantor did not receive fair consideration
or reasonably equivalent value to the extent that it did not directly benefit
from the notes' proceeds.

The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction being applied. Generally, however, an entity
would be considered insolvent if:

. the sum of its debts, including contingent or unliquidated debts, is
greater than all of its property at a fair valuation, or

. if the present fair salable value of its assets is less than the amount
that will be required to pay its probable liability on its existing debts
as they become absolute and matured.

However, a court may disagree with our conclusions in this regard.

We may not have sufficient assets to repurchase the notes upon a change of
control.

If a change of control occurs, the indenture requires us to offer to
repurchase all exchange notes. The events involving a change of control may
also constitute a default under the revolving credit facility. If we default
under the revolving credit facility, the lenders could require us to repay the
debt under the revolving credit facility in full before we repurchase the
exchange notes. We may not have sufficient funds to repurchase the exchange
notes if the lenders accelerate the debt under the revolving credit facility if
a change of control occurs. Our inability to repurchase all of the tendered
exchange notes would constitute an event of default under the indenture and you
would be entitled to accelerate the notes. However, a default under the
indenture would in turn, constitute a default under our senior debt. Since we
are obligated to pay our senior debt in full before making any payments under
the notes, we may not have sufficient assets remaining after we pay our senior
debt to satisfy our obligations to you under the notes. Moreover, the terms of
future debt may contain cross-default provisions based upon change of control
or other defaults under the debt instruments.

If we sell a substantial amount of our assets, we may not be required to
repurchase your notes.

The definition of change of control in the indenture includes the sale,
lease, transfer, conveyance or other disposition of all or "substantially all"
of our assets. Although there is a limited body of case law interpreting the
phrase "substantially all," there is no clearly established definition of the
phrase in the context of an indenture. Accordingly, your ability to require us
to repurchase your notes if we dispose of a substantial amount of our assets
may be uncertain.

No public market exists for the notes and you may not be able to resell your
notes.

Before this exchange offer, there was no public market for the exchange
notes. We do not intend to apply for listing of the exchange notes on any
securities exchange, although we expect the exchange notes to be eligible for
trading in PORTAL. Donaldson, Lufkin & Jenrette Securities Corporation and
BancAmerica Securities, the initial purchasers of the private notes, have
advised us that they intend to make a market in the exchange notes. However,
they are not obligated to do so

424B3 18th Page of 423 TOC 1st Previous Next ↓Bottom Just 18th
and may discontinue any market-making activity at any time without notice.
Liquid markets may not develop for the exchange notes and you may not be able
to resell your notes at all or at prices you consider reasonable. Future
trading prices of the exchange notes also will depend on many factors,
including prevailing interest rates, our operating results and the market for
similar securities.

----------------

FORWARD-LOOKING STATEMENTS

This prospectus, including the "Summary," "Unaudited Pro Forma Condensed
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" sections, contains "forward-looking
statements" which are identifiable by the use of forward-looking terms, such as
"may," "intend," "will," "expect," "anticipate," "estimate," "continue" or
similar phrases. In particular, any statement concerning future opportunities,
future operating results or the ability to generate revenues, income or cash
flow are forward-looking statements. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, our expectations
may not prove to be correct.

----------------

MARKET DATA

We based the market data included in this prospectus, including information
relating to our relative position in the industry, on independent industry
publications, other publicly available information or the good faith belief of
our management. Although we believe these sources are reliable, we have not
independently verified the information and cannot guarantee its accuracy and
completeness.

----------------

Throughout this prospectus we use the words "HDA," "we," "our," "ours," and
"us" to refer to HDA Parts System, Inc. and its subsidiaries. References to
"Holdings" refer to City Truck Holdings, Inc., our parent company. Unless the
context otherwise requires, all references to the following entities are before
or after giving effect to the acquisitions, as appropriate: (1) "City Truck"
means City Truck and Trailer Parts, Inc., (2) "Stone" means the assets and
business of Stone Heavy Duty, Inc., (3) "Truck & Trailer Parts" means Truck &
Trailer Parts, Inc., including DHP Leasing, Inc., (4) "Truckparts" means
Truckparts, Inc., (5) "Tampa Brake" means the assets and business of Tampa
Brake & Supply Co., Inc., (6) "Connecticut Driveshaft" means the assets and
business of Connecticut Driveshaft, Inc., (7) "Associated" means Associated
Brake Supply, Inc. and its subsidiaries, (8) "Tisco" means Tisco, Inc.,
including Tisco of Redding, Inc., (9) "Vantage Parts" means the assets and
business of the Vantage Parts division of CNF Transportation Inc. and one of
its subsidiaries, (10) "Active Gear" means Active Gear, L.L.C., (11) "Superior
Truck" means Superior Truck & Auto Supply, Inc., (12) "Certified Powertrain"
means some of the assets of the Certified Powertrain Specialist business of
Certified Power, Inc., (13) "California Equipment" means the assets and
business of California Equipment Company and California Equipment Company of
Sacramento, (14) "Wheels and Brakes" means Wheels and Brakes, Inc., including
Specrite Brake Company, and (15) "QDSP" means QDSP Holdings, Inc. and its
subsidiaries.

References to "HDA" mean City Truck and the companies or assets acquired
since June 1998; Stone, Truck & Trailer Parts, Truckparts, Tampa Brake,
Connecticut Driveshaft, Associated, Tisco, Vantage Parts, Active Gear, Superior
Truck, Certified Powertrain, California Equipment, Wheels and Brakes and QDSP,
and also refers to the historical performance or operations of those entities,
taken as a whole. References to "Brentwood" mean Brentwood Associates Buyout
Fund II, L.P., together with its affiliates, and references to "Aurora" mean
Aurora Capital Partners L.P., together with its affiliates.

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THE EXCHANGE OFFER

Purpose of the Exchange Offer

We issued the private notes on July 31, 1998 to Donaldson, Lufkin & Jenrette
Securities Corporation and BancAmerica Securities, the initial purchasers,
pursuant to a purchase agreement. The initial purchasers subsequently sold the
private notes to "qualified institutional buyers," as defined in Rule 144A
under the Securities Act, in reliance on Rule 144A, and outside the United
States under Regulation S of the Securities Act. As a condition to the sale of
the private notes, we entered into a registration rights agreement with the
initial purchasers on July 31, 1998. Pursuant to the registration rights
agreement, we agreed that we would:

(1) file a registration statement with the SEC with respect to the exchange
notes on or before December 28, 1998;

(2) use our best efforts to cause the registration statement to be declared
effective by the SEC on or before March 13, 1999;

(3) use our best efforts to keep the registration statement effective until
the closing of the exchange offer;

(4) use our best efforts to keep the exchange offer open for a period of
not less than 20 business days; and

(5) use our best efforts to cause the exchange offer to be completed no
later than the 30th business day after it is declared effective by the
SEC.

Upon the effectiveness of the registration statement, we will offer the
exchange notes in exchange for the private notes. We filed a copy of the
registration rights agreement as an exhibit to the registration statement. The
registration statement satisfies some of our obligations under the registration
rights agreement; however, we did not comply with our obligations to file and
have the registration statement declared effective as described in items (1)
and (2) above and are paying you liquidated damages in the form of additional
interest pursuant to the registration rights agreement. The rate is currently
$20,000 per week in the aggregate. The amount of the liquidated damages
accelerates by an additional $5,000 per week at the beginning of and for each
90-day period following our failure to comply with our registration obligations
until we satisfy those obligations. The maximum amount of liquidated damages we
are required to pay is $50,000 per week in the aggregate. See "--Liquidated
Damages" for more detail regarding the calculation of liquidated damages.

Resale of the Exchange Notes

Based upon an interpretation by the staff of the SEC contained in no-action
letters issued to third parties, we believe that you may exchange private notes
for exchange notes in the ordinary course of business. For further information
on the SEC's position, see Exxon Capital Holdings Corporation, available May
13, 1988, Morgan Stanley & Co. Incorporated, available June 5, 1991 and
Shearman & Sterling, available July 2, 1993, and other interpretive letters to
similar effect. You will be allowed to resell exchange notes to the public
without further registration under the Securities Act and without delivering to
purchasers of the exchange notes a prospectus that satisfies the requirements
of Section 10 of the Securities Act so long as you do not participate, do not
intend to participate, and have no arrangement with any person to participate,
in a distribution of the exchange notes. However, the foregoing does not apply
to you if you are:

. a broker-dealer who purchases the exchange notes directly from us to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act; or

. you are an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act.

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In addition, if:

. you are a broker-dealer; or

. you acquire exchange notes in the exchange offer for the purpose of
distributing or participating in the distribution of the exchange notes,

you cannot rely on the position of the staff of the SEC contained in the
no-action letters mentioned above and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available.

Each broker-dealer that receives exchange notes for its own account in
exchange for private notes, which the broker-dealer acquired as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
The letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. A broker-dealer may use
this prospectus, as it may be amended or supplemented from time to time, in
connection with resales of exchange notes received in exchange for private
notes which the broker-dealer acquired as a result of market-making or other
trading activities.

Terms of the Exchange Offer

Upon the terms and subject to the conditions described in this prospectus and
in the letter of transmittal, we will accept any and all private notes validly
tendered and not withdrawn before the expiration date. We will issue $1,000
principal amount of exchange notes in exchange for each $1,000 principal amount
of outstanding private notes surrendered pursuant to the exchange offer. You
may tender private notes only in integral multiples of $1,000.

The form and terms of the exchange notes are the same as the form and terms
of the private notes except that:

. we will register the exchange notes under the Securities Act and,
therefore, the exchange notes will not bear legends restricting their
transfer; and

. holders of the exchange notes will not be entitled to any of the rights
of holders of private notes under the registration rights agreement,
which rights will terminate upon the completion of the exchange offer.

The exchange notes will evidence the same debt as the private notes and will be
issued under the same indenture, so the exchange notes and the private notes
will be treated as a single class of debt securities under the indenture.

As of the date of this prospectus, $100,000,000 in aggregate principal amount
of the private notes are outstanding and registered in the name of Cede & Co.,
as nominee for The Depository Trust Company. Only registered holders of the
private notes, or their legal representative or attorney-in-fact, as reflected
on the records of the trustee under the indenture may participate in the
exchange offer. We will not set a fixed record date for determining registered
holders of the private notes entitled to participate in the exchange offer.

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You do not have any appraisal or dissenters' rights under the indenture in
connection with the exchange offer. We intend to conduct the exchange offer in
accordance with the provisions of the registration rights agreement and the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations of the SEC.

We will be deemed to have accepted validly tendered private notes when, as
and if we had given oral or written notice of acceptance to the exchange agent.
The exchange agent will act as your agent for the purposes of receiving the
exchange notes from us.

If you tender private notes in the exchange offer you will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of private notes
pursuant to the exchange offer. We will pay all charges and expenses, other
than the applicable taxes described below, in connection with the exchange
offer.

Expiration Date; Extensions; Amendments

The term expiration date will mean 5:00 p.m., New York City time on December
14, 1999, unless we, in our sole discretion, extend the exchange offer, in
which case the term expiration date will mean the latest date and time to which
we extend the exchange offer.

To extend the exchange offer, we will:

. notify the exchange agent of any extension orally or in writing; and

. mail to each registered holder an announcement that will include
disclosure of the approximate number of private notes deposited to date,

each before 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.

We reserve the right, in our reasonable discretion:

. to delay accepting any private notes:

. to extend the exchange offer; or

. if any conditions listed below under "--Conditions" are not satisfied, to
terminate the exchange offer by giving oral or written notice of the
delay, extension or termination to the exchange agent.

We will follow any delay in acceptance, extension or termination as promptly
as practicable by oral or written notice to the registered holders. If we amend
the exchange offer in a manner we determine constitutes a material change, we
will promptly disclose the amendment in a prospectus supplement that we will
distribute to the registered holders. We will also extend the exchange offer
for a period of five to ten business days, depending upon the significance of
the amendment and the manner of disclosure, if the exchange offer would
otherwise expire during the five to ten business day period.

Interest on the Exchange Notes

The exchange notes will bear interest at the same rate and on the same terms
as the private notes. Consequently, the exchange notes will bear interest at a
rate equal to 12% per annum. Interest will be payable semi-annually in arrears
on February 1 and August 1, commencing August 1, 1999.

424B3 22nd Page of 423 TOC 1st Previous Next ↓Bottom Just 22nd
You will receive interest on February 1, 2000 from August 1, 1999. We will deem
the right to receive any interest accrued on the private notes waived by you if
we accept your private notes for exchange.

Procedures for Tendering

You may tender private notes in the exchange offer only if you are a
registered holder of private notes. To tender in the exchange offer, you must:

. complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal;

. have the signatures guaranteed if required by the letter of transmittal;
and

. mail or otherwise deliver the letter of transmittal or the facsimile to
the exchange agent at the address listed below under "--Exchange Agent"
for receipt before the expiration date.

In addition, either:

. the exchange agent must receive certificates for the private notes along
with the letter of transmittal into its account at the depositary
pursuant to the procedure for book-entry transfer described below before
the expiration date;

. the exchange agent must receive a timely confirmation of a book-entry
transfer of the private notes, if the procedure is available, into its
account at the depositary pursuant to the procedure for book-entry
transfer described below before the expiration date; or

. you must comply with the guaranteed delivery procedures described below.

Your tender, if not withdrawn before the expiration date, will constitute an
agreement between you and us in accordance with the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.

The method of delivery of private notes and the letter of transmittal and all
other required documents to the exchange agent is at your election and risk. We
recommend that instead of delivery by mail, you use an overnight or hand
delivery service, properly insured. In all cases, you should allow sufficient
time to assure delivery to the exchange agent before the expiration date. You
should not send letters of transmittal or private notes to us. You may request
your respective brokers, dealers, commercial banks, trust companies or nominees
to effect the transactions described above for you.

If you are a beneficial owner of private notes whose private notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender your notes, you should contact the
registered holder promptly and instruct the registered holder to tender on your
behalf. If you wish to tender on your own behalf, before completing and
executing the letter of transmittal and delivering the private notes you must
either:

. make appropriate arrangements to register ownership of the private notes
in your name; or

. obtain a properly completed bond power from the registered holder.

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The transfer of registered ownership may take considerable time. Unless the
private notes are tendered:

(1) by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the letter of transmittal; or

(2) for the account of:

. a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.,

. a commercial bank or trust company having an office or correspondent
in the United States; or

. an "eligible guarantor institution" within the meaning of Rule 17Ad-15
under the Exchange Act that is a member of one of the recognized
signature guarantee programs identified in the letter of transmittal,

an eligible guarantor institution must guarantee the signatures on a letter of
transmittal or a notice of withdrawal described below under "--Withdrawal of
Tenders."

If the letter of transmittal is signed by a person other than the registered
holder, the private notes must be endorsed or accompanied by a properly
completed bond power, signed by the registered holder as the registered
holder's name appears on the private notes.

If the letter of transmittal or any private notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
they should so indicate when signing, and unless waived by us, they must submit
evidence satisfactory to us of their authority to so act with the letter of
transmittal.

The exchange agent and the depositary have confirmed that any financial
institution that is a participant in the depositary's system may utilize the
depositary's Automated Tender Offer Program to tender notes.

We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, acceptance and withdrawal of
tendered private notes, which determination will be final and binding. We
reserve the absolute right to reject any and all private notes not properly
tendered or any private notes our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular private notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, you must cure any defects or irregularities in
connection with tenders of private notes within the time we determine. Although
we intend to notify you of defects or irregularities with respect to tenders of
private notes, neither we, the exchange agent nor any other person will incur
any liability for failure to give you that notification. Unless waived, we will
not deem tenders of private notes to have been made until you cure the defects
or irregularities.

While we have no present plan to acquire any private notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any private notes that are not tendered in the exchange offer, we
reserve the right in our sole discretion to purchase or make offers for any
private notes that remain outstanding after the expiration date. We also
reserve the right to

424B3 24th Page of 423 TOC 1st Previous Next ↓Bottom Just 24th
terminate the exchange offer, as described below under "--Conditions," and, to
the extent permitted by applicable law, purchase private notes in the open
market, in privately negotiated transactions or otherwise. The terms of any of
those purchases or offers could differ from the terms of the exchange offer.

If you wish to tender private notes in exchange for exchange notes in the
exchange offer, we will require you to represent that:

. you are not an affiliate of ours;

. you will acquire any exchange notes in the ordinary course of your
business; and

. at the time of completion of the exchange offer, you have no arrangement
with any person to participate in the distribution of the exchange notes.

In addition, in connection with the resale of exchange notes, any
participating broker-dealer who acquired the private notes for its own account
as a result of market-making or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The SEC has taken
the position that participating broker-dealers may fulfill their prospectus
delivery requirements with respect to the exchange notes, other than a resale
of an unsold allotment from the original sale of the notes, with the prospectus
contained in the registration statement.

Return of Notes

If we do not accept any tendered private notes for any reason described in
the terms and conditions of the exchange offer or if you withdraw or submit
private notes for a greater principal amount than you desire to exchange, we
will return the unaccepted, withdrawn or non-exchanged notes without expense to
you as promptly as practicable. In the case of private notes tendered by book-
entry transfer into the exchange agent's account at the depositary pursuant to
the book-entry transfer procedures described below, we will credit the private
notes to an account maintained with the depositary as promptly as practicable.

Book-Entry Transfer

The exchange agent will make a request to establish an account with respect
to the private notes at the depositary for purposes of the exchange offer
within two business days after the date of this prospectus, and any financial
institution that is a participant in the depositary's systems may make book-
entry delivery of private notes by causing the depositary to transfer the
private notes into the exchange agent's account at the depositary in accordance
with the depositary's procedures for transfer. However, although delivery of
private notes may be effected through book-entry transfer at the depositary,
you must transmit and the exchange agent must receive, the letter of
transmittal or a facsimile of the letter of transmittal, with any required
signature guarantees and any other required documents, at the address below
under "--Exchange Agent" on or before the expiration date or pursuant to the
guaranteed delivery procedures described below.

Guaranteed Delivery Procedures

If you wish to tender your private notes and (1) the notes are not
immediately available or (2) you cannot deliver the private notes, the letter
of transmittal or any other required documents to the exchange agent before the
expiration date, may effect a tender if:

(a) the tender is made through an eligible guarantor institution;

424B3 25th Page of 423 TOC 1st Previous Next ↓Bottom Just 25th
(b) before the expiration date, the exchange agent receives from the
eligible guarantor institution a properly completed and duly executed
notice of guaranteed delivery, substantially in the form provided by us,
that:

. states your name and address, the certificate number(s) of the
private notes and the principal amount of private notes tendered,

. states that the tender is being made by that notice of guaranteed
delivery, and

. guarantees that, within three New York Stock Exchange trading days
after the expiration date, the eligible guarantor institution will
deposit with the exchange agent the letter of transmittal, together
with the certificate(s) representing the private notes in proper form
for transfer or a confirmation of a book-entry transfer, as the case
may be, and any other documents required by the letter of
transmittal; and

(c) within five New York Stock Exchange trading days after the expiration
date, the exchange agent receives a properly executed letter of
transmittal, as well as the certificate(s) representing all tendered
private notes in proper form for transfer and all other documents required
by the letter of transmittal.

Upon request, the exchange agent will send to you a notice of guaranteed
delivery if you wish to tender your notes according to the guaranteed delivery
procedures described above.

Withdrawal of Tenders

Except as otherwise provided in this prospectus, you may withdraw tenders of
private notes at any time before 5:00 p.m. on the expiration date.

To withdraw a tender of private notes in the exchange offer, the exchange
agent must receive a written or facsimile transmission notice of withdrawal at
its address listed in this prospectus before the expiration date. Any notice of
withdrawal must:

. specify the name of the person who deposited the private notes to be
withdrawn;

. identify the private notes to be withdrawn, including the certificate
number(s) and principal amount of the private notes; and

. be signed in the same manner as the original signature on the letter of
transmittal by which the private notes were tendered, including any
required signature guarantees.

We will determine in our sole discretion all questions as to the validity,
form and eligibility of the notices, and our determination will be final and
binding on all parties. We will not deem any properly withdrawn private notes
to have been validly tendered for purposes of the exchange offer, and we will
not issue exchange notes with respect to those private notes, unless you
validly retender the withdrawn private notes. You may retender properly
withdrawn private notes by following one of the procedures described above
under "The Exchange Offer -- Procedures for Tendering" at any time before the
expiration date.

Conditions

Notwithstanding any other term of the exchange offer, we will not be required
to accept for exchange, or exchange the exchange notes for, any private notes,
and may terminate the exchange

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offer as provided in this prospectus before the acceptance of the private
notes, if, in our reasonable judgment, the exchange offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
SEC.

If we determine in our reasonable discretion that any of these conditions are
not satisfied, we may:

. refuse to accept any private notes and return all tendered private notes
to you;

. extend the exchange offer and retain all private notes tendered before
the exchange offer expires, subject, however, to your rights to withdraw
the private notes; or

. waive the unsatisfied conditions with respect to the exchange offer and
accept all properly tendered private notes that have not been withdrawn.

If the waiver constitutes a material change to the exchange offer, we will
promptly disclose the waiver by means of a prospectus supplement that we will
distribute to the registered holders of the private notes, and we will extend
the exchange offer for a period of five to ten business days, depending upon
the significance of the waiver and the manner of disclosure to the registered
holders, if the exchange offer would otherwise expire during the five to ten
business day period.

Termination of Rights

All of your rights under the registration rights agreement will terminate
upon consummation of the exchange offer except with respect to our continuing
obligations:

. to indemnify you and parties related to you against liabilities,
including liabilities under the Securities Act; and

. to provide, upon your request, the information required by Rule
144A(d)(4) under the Securities Act to permit resales of the notes
pursuant to Rule 144A.

Shelf Registration

If (1) applicable law or SEC policy does not permit the exchange offer or (2)
you notify us before the 20th business day following the completion of the
exchange offer that:

. you are prohibited by law or SEC policy from participating in the
exchange offer;

. you may not resell the exchange notes acquired by you in the exchange
offer to the public without delivering a prospectus, and the prospectus
contained in the registration statement is not appropriate or available
for resales by you; or

. you are a broker-dealer and hold notes acquired directly from us,

we will file with the SEC a shelf registration statement to register for public
resale the transfer restricted securities held by you if you provide us with
the necessary information for inclusion in the shelf registration statement.

For the purposes of the registration rights agreement, "transfer restricted
securities" means each private note until the earliest date on which:

. the private note is exchanged in the exchange offer and entitled to be
resold to the public without complying with the prospectus delivery
requirements of the Securities Act;

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. the private note is disposed of in accordance with the shelf registration
statement;

. the private note is disposed of by a broker-dealer pursuant to the "Plan
of Distribution" contemplated by the registration statement; or

. the private note is distributed to the public pursuant to Rule 144 under
the Securities Act.

Liquidated Damages

If:

(1) we do not file the registration statement with the SEC on or before
December 28, 1998;

(2) the SEC does not declare the registration statement effective on or
before March 13, 1999;

(3) we do not complete the exchange offer on or before the 30th business
day after the SEC declares the registration statement effective;

(4) if we are obligated to file the shelf registration statement, we fail
to file the shelf registration statement with the SEC on or before the 30th
business day after the filing obligation arises;

(5) if we are obligated to file a shelf registration statement, the SEC
does not declare the shelf registration statement effective on or before
the 90th day after the obligation to file a shelf registration statement
arises; or

(6) if the registration statement or the shelf registration statement, as
the case may be, is declared effective but thereafter ceases to be
effective or useable in connection with resales of the transfer restricted
securities, for the time of non-effectiveness or non-usability,

with each of items (1) through (6) constituting a "registration default,"
we agree to pay you liquidated damages in an amount equal to $0.05 per week
per $1,000 in principal amount of transfer restricted securities held by
you for each week or portion of a week that the registration default
continues for the first 90-day period immediately following the occurrence
of the registration default. The amount of the liquidated damages will
increase by an additional $0.05 per week per $1,000 in principal amount of
transfer restricted securities at the beginning of and for each subsequent
90-day period until all registration defaults have been cured, up to a
maximum amount of liquidated damages of $0.50 per week per $1,000 in
principal amount of transfer restricted securities. We will not be required
to pay liquidated damages for more than one registration default at any
given time. Following the cure of all registration defaults, the accrual of
liquidated damages will cease.

We did not comply with our obligation to file and have the registration
statement declared effective as described in items (1) and (2) above and are
currently paying you liquidated damages in the form of additional interest
pursuant to the registration rights agreement. The rate is currently $20,000
per week in the aggregate. We will pay all accrued liquidated damages in the
same manner and on the same dates as the interest payments on the notes.

424B3 28th Page of 423 TOC 1st Previous Next ↓Bottom Just 28th
Exchange Agent

We have appointed U.S. Trust Company, National Association as exchange agent
for the exchange offer. You should direct questions and requests for
assistance, requests for additional copies of this prospectus or the letter of
transmittal and requests for a notice of guaranteed delivery to the exchange
agent addressed as follows:

By registered or Certified Mail: By Hand Delivery:

c/o United States Trust Company of c/o United States Trust Company of
New York New York
P.O. Box 841 Peter Cooper Station 111 Broadway, Lower Level
New York, New York 10276-0841 New York, New York 10006-1906
Attn: Corporate Trust Operations Attn: Corporate Trust Operations

By Overnight Delivery: By Facsimile:

c/o United States Trust Company of (212) 420-6211
New York Attn: Customer Service
770 Broadway, 13th Floor
New York, New York 10003
Attn: Corporate Trust Operations Confirm by Telephone:
(800) 225-2398

Delivery to an address other than the one stated above or transmission via a
facsimile number other than the one stated above will not constitute a valid
delivery.

Fees and Expenses

We will bear the expenses of soliciting tenders. We are making the principal
solicitation by mail; however, our and our affiliates' officers and regular
employees may make additional solicitations by telegraph, telephone or in
person.

We have not retained any dealer manager in connection with the exchange offer
and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses.

We will pay the cash expenses incurred in connection with the exchange offer
which we estimate to be approximately $1 million. These expenses include
registration fees, fees and expenses of the exchange agent and the trustee,
accounting and legal fees and printing costs, among others.

We will pay all transfer taxes, if any, applicable to the exchange of notes
pursuant to the exchange offer. If, however, a transfer tax is imposed for any
reason other than the exchange of the private notes pursuant to the exchange
offer, then you must pay the amount of the transfer taxes. If you do not submit
satisfactory evidence of payment of the taxes or exemption from payment with
the letter of transmittal, we will bill the amount of the transfer taxes
directly to you.

Consequence of Failures to Exchange

Participation in the exchange offer is voluntary. We urge you to consult your
financial and tax advisors in making your decisions on what action to take.

424B3 29th Page of 423 TOC 1st Previous Next ↓Bottom Just 29th
Private notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities. Accordingly, those private
notes may be resold only:

. to a person whom the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;

. in a transaction meeting the requirements of Rule 144 under the
Securities Act;

. outside the United States to a foreign person in a transaction meeting
the requirements of Rule 903 or 904 of Regulation S under the Securities
Act;

. in accordance with another exemption from the registration requirements
of the Securities Act and based upon an opinion of counsel if we so
request;

. to us; or

. pursuant to an effective registration statement.

In each case, the private notes may be resold only in accordance with any
applicable securities laws of any state of the United States or any other
applicable jurisdiction.

424B3 30th Page of 423 TOC 1st Previous Next ↓Bottom Just 30th
COMPANY HISTORY

We were established by Brentwood, a private equity fund located in Los
Angeles, in June 1998 through the acquisition and integration of two highly
regarded heavy duty vehicle aftermarket parts distributors: City Truck and
Stone, which have been in operation since 1975 and 1952, respectively. On June
1, 1998, Brentwood purchased 80% of the outstanding common stock of City Truck,
a Birmingham, Alabama based distributor with 17 branch locations in the
southeastern United States, in a recapitalization transaction. On June 19,
1998, City Truck acquired substantially all of the net assets of Stone, a
Raleigh, North Carolina based operator with 18 branch locations primarily in
the southeastern United States. On June 30, 1998, City Truck as recapitalized
and including Stone changed its name to HDA Parts System, Inc., the issuer of
the notes offered by this prospectus.

We were formed by Brentwood to pursue a consolidation strategy in the highly
fragmented heavy duty aftermarket parts industry. Since our inception, we have
acquired 14 companies, including our September 30, 1999 merger with QDSP, a
company formed in June 1998 by Aurora, a private equity fund located in Los
Angeles, to pursue an acquisition strategy similar to ours. Since QDSP's
inception, it has acquired 12 companies.

HDA's acquisitions are described below:

[Download Table]

Number
Acquisition of Branch
Company Date Region Locations
------- ----------- ------ ---------

City Truck............................ May 1998 Southeast 17
Stone................................. June 1998 Mid-Atlantic 18
Truck & Trailer Parts................. September 1998 Southeast 7
Tampa Brake........................... October 1998 Southeast 5
Connecticut Driveshaft................ November 1998 New England 6
Truckparts............................ December 1998 New England 4
Associated............................ January 1999 West 22
Tisco................................. January 1999 West 4
Active Gear........................... April 1999 West 2
Vantage Parts......................... May 1999 National 7
Superior Truck........................ June 1999 New England 1
Certified Powertrain.................. August 1999 Northeast 1
California Equipment.................. August 1999 West 6
QDSP.................................. September 1999 National 63
Wheels and Brakes..................... October 1999 Southeast 10
---
173
===

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QDSP's acquisitions are described below:

[Download Table]

Number
of Branch
Company Acquisition Date Region Locations
------- ---------------- ------ ---------

Fleetpride, Inc............ July 1998 Northeast 8
Sharkey Family Holdings,
Inc. (d/b/a Universal
Joint Sales Company)...... July 1998 Northeast 11
Truck City Parts, Inc...... July 1998 Central/Mid-Atlantic 7
Wheatley Truck Parts,
Inc....................... July 1998 Central 4
Automotive Sales Company,
Inc....................... July 1998 Southwest 2
Drive Train Southwest,
Inc....................... July 1998 Southwest 4
SLM Group, Inc............. August 1998 Southcentral 14
Holt Incorporated.......... August 1998 Central 5
City Spring Works, Inc..... August 1998 Central 3
Clutch & Brake, Inc........ March 1999 Northeast 2
New England Truck & Auto
Service, Inc.............. March 1999 Northeast 1
TBS, Incorporated.......... March 1999 Southwest 2
---
63
===

424B3 32nd Page of 423 TOC 1st Previous Next ↓Bottom Just 32nd
USE OF PROCEEDS

The exchange offer satisfies an obligation under the registration rights
agreement. We will not receive any cash proceeds from the exchange offer.

CAPITALIZATION

The following table sets forth as of June 30, 1999 (1) our actual
capitalization and (2) our pro forma capitalization after giving effect to the
Certified Powertrain, California Equipment, QDSP and Wheels and Brakes
acquisitions and the related $40.0 million equity investment and refinancing of
the revolving credit facility. You should read this table in conjunction with
the "Unaudited Pro Forma Condensed Financial Data" and related notes, "Selected
Historical Financial and Operating Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources," all included elsewhere in this prospectus.

[Download Table]

As of June 30,
1999
-----------------
Pro
Actual Forma
-------- --------
(In thousands)

Cash and cash equivalents.................................... $ 7,771 $ 5,074
======== ========
Long-term debt:
Note payable............................................... $ 150 $ 150
$85 million revolving credit facility...................... 66,750 --
New $150 million revolving credit facility................. -- 28,100
New Term loan.............................................. -- 75,000
Existing senior subordinated notes......................... 100,000 100,000
-------- --------
Total Debt............................................... 166,900 203,250
Stockholders' equity......................................... 78,823 188,394
-------- --------
Total Capitalization..................................... $245,723 $391,644
======== ========

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UNAUDITED PRO FORMA FINANCIAL DATA

Holdings is our parent company and has no separate operations. Its only asset
is its investment in us and equity in our earnings recorded and it has no
liabilities. Holdings is contingently liable for its guarantee of our debt.
Thus, our separate pro forma financial statements are not presented.

We derived the following unaudited pro forma financial data by applying pro
forma consolidated adjustments to Holdings' historical financial statements,
after giving effect to:

(1) the recapitalization of City Truck;

(2) the acquisitions of Stone, Truck & Trailer Parts, Tampa Brake,
Connecticut Driveshaft, Truckparts, Tisco, Associated, Active Gear,
Vantage Parts, Superior Truck, Certified Powertrain, California
Equipment, Wheels and Brakes and QDSP;

(3) the effect of refinancing the revolving credit facility and the
issuance of the notes;

(4) the June 1998 private equity offering and the January 1999 private
equity offering, which was fully funded in April 1999; and

(5) the equity contribution we received in connection with the QDSP
merger.

These pro forma consolidated adjustments give effect to the above
transactions as if these transactions had occurred on January 1, 1998 for the
condensed pro forma income statement data, and as if these transactions had
occurred on June 30, 1999 for the condensed pro forma balance sheet data,
except that the acquisitions we completed prior to June 30, 1999 are included
in the June 30, 1999 balance sheet. We describe the pro forma adjustments in
the accompanying notes.

The unaudited pro forma financial data are subject to numerous assumptions
and estimates which are subject to change and, in many cases, are beyond our
control. The unaudited pro forma financial data may not be indicative of the
operating results or financial position we would have achieved had we
consummated the events described above. You should not construe this data as
representative of our future operating results or financial position. You
should read the unaudited pro forma financial data in conjunction with the
historical financial statements of Holdings, Stone, Truck & Trailer Parts,
Connecticut Driveshaft, Truckparts, Tisco, Associated, Vantage Parts, Superior
Truck, California Equipment, Wheels and Brakes and QDSP, and the related notes,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," all included elsewhere in this prospectus.

424B3 34th Page of 423 TOC 1st Previous Next ↓Bottom Just 34th
CITY TRUCK HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(In thousands)

[Download Table]

Post 06/30/99
Acquisitions
--------------------
(1) (2) (3)
Actual Actual Pro Forma
06/30/99 06/30/99 Adjustments Total
-------- -------- ----------- --------
ASSETS
------

Current assets:
Cash and cash equivalents......... $ 7,771 $ 7,265 $ (9,962)(a) $ 5,074
Accounts receivable, net.......... 37,744 27,757 -- 65,501
Inventories....................... 71,318 41,686 -- 113,004
Prepaid expenses/other current
assets........................... 4,294 6,450 -- 10,744
Current portion of notes
receivable/patronage dividend.... 2,906 427 (98)(b) 3,235
-------- -------- -------- --------
Total current assets............ 124,033 83,585 (10,060) 197,558
Property, plant and equipment, net.. 19,191 7,812 -- 27,003
Other assets........................ 16,424 1,223 (46)(c) 17,601
Deferred financing fees............. 5,835 1,668 3,135 (d) 10,638
Goodwill and other intangibles(4)... 122,753 65,884 18,352 (e) 206,989
-------- -------- -------- --------
Total assets.................... $288,236 $160,172 $ 11,381 $459,789
======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Bank overdraft.................... $ -- $ 231 $ (231)(f) $ --
Notes payable..................... 150 2,463 (2,463)(g) 150
Current portion of long-term
debt............................. -- 3,201 (3,201)(h) --
Accounts payable.................. 24,515 16,563 -- 41,078
Accrued liabilities............... 17,998 8,369 700 (i) 27,067
-------- -------- -------- --------
Total current liabilities....... 42,663 30,827 (5,195) 68,295
Revolving credit facility........... 66,750 56,963 (95,613)(h) 28,100
Term loan........................... -- -- 75,000 (h) 75,000
12% senior subordinated notes....... 100,000 -- -- 100,000
-------- -------- -------- --------
Total liabilities............... 209,413 87,790 (25,808) 271,395
Stockholders' equity:
Series B preferred stock.......... 88,142 32,573 49,489 (j) 170,204
Common stock...................... 2 256 (254)(j) 4
Additional paid-in capital........ 29,848 33,403 (2,931)(j) 60,320
Employee notes.................... (425) -- -- (425)
Retained earnings................. (38,744) 6,150 (9,115)(k) (41,709)
-------- -------- -------- --------
Total stockholders' equity
(deficit)...................... 78,823 72,382 37,189 188,394
-------- -------- -------- --------
Total liabilities and
stockholders' equity........... $288,236 $160,172 $ 11,381 $459,789
======== ======== ======== ========

(footnotes on following page)

424B3 35th Page of 423 TOC 1st Previous Next ↓Bottom Just 35th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(In thousands)

(1) "Actual 6/30/99" represents our actual historical June 30, 1999 balances,
including those of acquisitions purchased as of June 30, 1999.

(2) "Post 6/30/99 Acquisitions--Actual 6/30/99" represents the actual
historical June 30, 1999 balances for companies acquired after June 30,
1999: Certified Powertrain, California Equipment, Wheels and Brakes and
QDSP.

[Download Table]

Certified California Wheels and
Powertrain Equipment Brakes QDSP Total
---------- ---------- ---------- -------- --------
ASSETS
------

Current assets:
Cash and cash
equivalents.............. $ -- $ 279 $ 108 $ 6,878 $ 7,265
Accounts receivable, net.. 1,139 1,097 4,090 21,431 27,757
Inventories............... 1,465 2,305 5,586 32,330 41,686
Prepaid expenses and other
current assets........... -- 36 105 6,309 6,450
Current portion of notes
receivable and........... -- -- -- -- --
patronage dividend...... 329 65 33 -- 427
------ ------ ------- -------- --------
Total current assets.. 2,933 3,782 9,922 66,948 83,585
Property, plant and
equipment, net............. 125 129 251 7,307 7,812
Other assets................ -- 110 52 1,061 1,223
Deferred financing fees..... -- -- -- 1,668 1,668
Goodwill and other
intangibles................ -- -- -- 65,884 65,884
------ ------ ------- -------- --------
Total assets........ $3,058 $4,021 $10,225 $142,868 $160,172
====== ====== ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
--------------------
Current liabilities:
Bank overdraft............ $ -- $ 231 $ -- $ -- $ 231
Notes payable............. -- -- 2,463 -- 2,463
Current portion of long-
term debt................ -- -- 802 2,399 3,201
Accounts payable.......... 708 1,336 3,460 11,059 16,563
Accrued liabilities....... -- -- 602 7,767 8,369
------ ------ ------- -------- --------
Total current
liabilities.......... 708 1,567 7,327 21,225 30,827
Revolving credit facility... -- 1,587 -- 55,376 56,963
Term loan................... -- -- -- -- --
12% senior subordinated
notes...................... -- -- -- -- --
------ ------ ------- -------- --------
Total liabilities..... 708 3,154 7,327 76,601 87,790
Stockholders' equity:
Series B preferred stock.. -- -- -- 32,573 32,573
Common stock.............. -- 162 3 91 256
Additional paid-in
capital.................. -- 848 73 32,482 33,403
Retained earnings......... 2,350 (143) 2,822 1,121 6,150
------ ------ ------- -------- --------
Total stockholders'
equity................. 2,350 867 2,898 66,267 72,382
------ ------ ------- -------- --------
Total liabilities and
stockholders'
equity............... $3,058 $4,021 $10,225 $142,868 $160,172
====== ====== ======= ======== ========

(3) "Post 6/30/99 Acquisitions--Pro Forma Adjustments" represents the pro forma
adjustments to the historical financial statements of the companies
acquired after June 30, 1999 as if the acquisitions and refinancings of
debt had been completed on June 30, 1999. The items below indicate the
changes made to the historical financial statements.

424B3 36th Page of 423 TOC 1st Previous Next ↓Bottom Just 36th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)

(a) Reflects the elimination of cash of California Equipment ($279) and
Wheels and Brakes ($108) not acquired as part of the acquisition and
cash of $9,575 used to in-part finance the acquisition of Wheels and
Brakes.

(b) Reflects the elimination of patronage dividends of California Equipment
($65) and Wheels and Brakes ($33) not acquired as part of the
acquisitions.

(d) Reflects transaction fees of $6,100 related to establishing the term
loan and new revolving credit facility and the elimination of financing
fees for the existing revolving credit facility ($2,965).

(e) Reflects the recognition of goodwill for Certified Powertrain ($4,255),
California Equipment ($5), Wheels and Brakes ($6,778) and an increase
of goodwill for QDSP ($4,919) and other intangibles for Certified
Powertrain ($195), Wheels and Brakes ($350) and QDSP ($1,850).

(f) Reflects the elimination of a bank overdraft at California Equipment of
$231 not acquired as part of the acquisition.

(g) Reflects the elimination of notes payable at Wheels and Brakes of
$2,463 not acquired as part of the acquisition.

(h) Reflects the elimination of debt of California Equipment ($1,587) and
Wheels and Brakes ($802) not acquired as part of the acquisition and a
$27,525 repayment of existing debt from equity contributions of $40,000
(see note i below), less $12,475 used to in-part finance the
acquisition of Certified Powertrain ($6,800), California Equipment
($2,250) and Wheels and Brakes ($3,425), and refinancing the remaining
debt with borrowings from the new revolving credit facility and term
loan, net of $6,100 in transaction fees.

(i) Reflects liabilities recorded in connection with the acquisitions of
California Equipment ($50), Wheels and Brakes ($150) and QDSP ($500).

(j) Reflects the issuance of stock related to the acquisition of QDSP
($72,536) and equity contributions in cash ($40,000) less QDSP
previously outstanding stock ($65,146) and the elimination of stock of
California Equipment ($1,010) and Wheels and Brakes ($76).

(k) Reflects the elimination of equity prior to the acquisitions for
Certified Powertrain ($2,350), California Equipment ($(143)), Wheels
and Brakes ($2,822) and QDSP ($1,121) and the elimination of financing
fees for the existing revolving credit facility ($2,965).

424B3 37th Page of 423 TOC 1st Previous Next ↓Bottom Just 37th
(4) The purchase price for each acquisition has been allocated to the assets
acquired and liabilities assumed as shown below. Total consideration for
the businesses includes cash of $180.4 million, common and preferred stock
issued of $87.6 million and transaction fees of $18.9 million. The
allocation includes a building acquired with a value of $2.3 million based
upon an independent valution and the recognition $6.5 million of
liabilities in connection with vendor consolidations, the closure of
duplicate facilities and other activities that will be phased out in 1999.
We have determined the fair value of the remaining assets and liabilities
approximates the existing book values. Our business is that of a
distributor of heavy duty vehicle parts and as such we believe that profit
is attributable to the selling of the parts. Accordingly, the book value of
inventory acquired has not been increased since no previously earned profit
exists. The intangible assets were identified and valued by an independent
appraisal related to workforce knowledge and experience, non-compete
agreements with former owners and preferential customer agreements.
Amortization of goodwill and other intangibles from the date of acquisition
through June 30, 1999 was $2.1 million resulting in pro forma net goodwill
and intangibles of $207.0 at June 30, 1999.

[Download Table]

Total Tangible Identified
Purchase Assets Liabilities Intangible Recorded
Acquisition Price Acquired Acquired Assets Goodwill
----------- -------- -------- ----------- ---------- --------

Stone................... $ 27,637 (1) $ 18,963 $ 8,880 $ 878 $ 16,676
Truck & Trailer Parts... 21,568 (1) 8,898 3,568 247 15,991
Tampa Brake............. 10,068 (1) 5,246 2,010 348 6,484
Connecticut Driveshaft.. 9,832 (1) 9,711 3,462 132 3,451
Truckparts.............. 14,297 (1) 6,150 3,573 260 11,460
Associated.............. 62,137 22,011 5,652 676 45,102
Tisco................... 7,666 3,598 1,013 220 4,861
Active Gear............. 8,578 4,332 702 223 4,725
Vantage Parts........... 28,510 16,532 872 345 12,505
Superior Truck.......... 2,043 2,071 335 -- 307
Certified Powertrain.... 6,800 3,058 708 195 4,255
California Equipment.... 2,250 3,631 1,386 -- 5
Wheels and Brakes....... 13,000 10,084 4,212 350 6,778
QDSP.................... 72,536 76,984 77,101 1,850 70,803
-------- -------- -------- ------ --------
$286,922 $191,269 $113,474 $5,724 $203,403
======== ======== ======== ====== ========

---------------------
(1) The purchase price per the December 31, 1998 audited financial statements
of City Truck Holdings, Inc. is different from amounts above due to:
rounded amounts of $.1 million each for Stone Heavy Duty, Truck and Trailer
Parts and Connecticut Driveshaft, additional fees of $.2 million paid
subsequent to audit in 1999 for Truckparts, and a $.2 million working
capital adjustment settled subsequent to the audit for Tampa Brake.

424B3 38th Page of 423 TOC 1st Previous Next ↓Bottom Just 38th
CITY TRUCK HOLDINGS, INC.

UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Twelve Months Ended December 31, 1998
(In thousands)

[Download Table]

(1) (2) (3)
Pro Forma
Actual Pro Forma Subtotal Post 12/31/98 Twelve Months
12/31/98 Effect 1998 Acquisitions Ended 12/31/98
-------- --------- -------- ------------- --------------

Net sales............... $103,295 $89,555 $192,850 $350,465 $543,315
Cost of sales........... 65,855 61,254 127,109 239,757 366,866
-------- ------- -------- -------- --------
Gross profit............ 37,440 28,301 65,741 110,708 176,449
Selling, general and
administrative
expenses............... 31,030 22,901 53,931 89,972 143,903
-------- ------- -------- -------- --------
Operating income........ 6,410 5,400 11,810 20,736 32,546
Interest expense........ 6,519 7,562 14,081 6,611 20,692
Interest (income)....... (624) 624 -- -- --
Other (income) expense.. (86) (5) (91) (353) (444)
-------- ------- -------- -------- --------
Income before income
taxes.................. 601 (2,781) (2,180) 14,478 12,298
Income tax expense
(benefit).............. (687) (181) (868) 5,762 4,894
-------- ------- -------- -------- --------
Net income.............. $ 1,288 $(2,600) $ (1,312) $ 8,716 $ 7,404
======== ======= ======== ======== ========

(footnotes on following page)

424B3 39th Page of 423 TOC 1st Previous Next ↓Bottom Just 39th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Twelve Months Ended December 31, 1998
(In thousands)

(1) "Actual 12/31/98" represents our actual historical 1998 results, including
the results of acquisitions purchased in 1998 from the date of acquisition.

(2) "Pro Forma Effect" represents the actual historical 1998 results prior to
the date of acquisition for companies acquired in 1998 and the application
of pro forma adjustments to the historical financial statements of the
companies owned as of December 31, 1998 as if the acquisitions and
associated refinancings of debt and equity had been completed on January 1,
1998. The table below summarizes the historical results prior to
acquisition and the effects of the pro forma adjustments.

[Download Table]

Truck & Connecticut Tampa
Stone Trailer Drive Shaft Brake Truckparts Total
------- ------- ----------- ------- ---------- -------

Net sales............... $23,379 $22,925 $16,393 $14,225 $12,633 $89,555
Cost of sales........... 14,652 16,879 11,045 10,175 8,503 61,254
------- ------- ------- ------- ------- -------
Gross profit............ 8,727 6,046 5,348 4,050 4,130 28,301
Selling, general and
administrative
expenses............... 6,804 4,283 5,269 2,936 3,428 22,720
------- ------- ------- ------- ------- -------
Operating income........ 1,923 1,763 79 1,114 702 5,581
Interest expense........ -- 119 140 14 50 323
Interest (income)....... -- -- (7) -- (14) (21)
Other (income) expense.. (6) 8 -- -- (7) (5)
------- ------- ------- ------- ------- -------
Income before income
taxes.................. 1,929 1,636 (54) 1,100 673 5,284
Income tax expense
(benefit).............. -- -- 105 -- 303 408
------- ------- ------- ------- ------- -------
Net income (loss)....... $ 1,929 $ 1,636 $ (159) $ 1,100 $ 370 $ 4,876
======= ======= ======= ======= ======= =======

[Download Table]

Income
Prior to Pro Forma Pro Forma
Acquisition Adjustments Effect
----------- ----------- ---------

Net sales............................. $89,555 $ -- $89,555
Cost of sales......................... 61,254 -- 61,254
------- ------- -------
Gross profit.......................... 28,301 -- 28,301
Selling, general and administrative
expenses............................. 22,720 181 (b) 22,901
------- ------- -------
Operating income...................... 5,581 (181) 5,400
Interest expense...................... 323 7,239 (c) 7,562
Interest (income)..................... (21) 645 (d) 624
Other (income) expense................ (5) -- (5)
------- ------- -------
Income before income taxes............ 5,284 (8,065) (2,781)
Income tax expense (benefit).......... 408 (589)(e) (181)
------- ------- -------
Net income (loss)..................... $ 4,876(a) $(7,476) $(2,600)
======= ======= =======
--------
(a) Net income earned prior to acquisition. $4,876

(b) Reflects the pro forma adjustments to selling, general and
administrative expenses.
-- Expense related to the revision of lease agreements,
shortening the lease period and increasing amortization
expense related to leasehold improvements. (50)
-- Elimination of excess compensation, fringe benefits and
related expenses of existing employees based upon salaried
amounts in employment contracts entered into at the time
of the acquisitions. 2,008

424B3 40th Page of 423 TOC 1st Previous Next ↓Bottom Just 40th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

[Download Table]

-- Elimination of rent and related expenses for leased
property owned by stockholders' which is no longer being
leased to us, net of a contractual increase in lease
expense. 300
-- Elimination of excess depreciation due to converting to
a straight-line policy. 112
-- Elimination of the net costs included in the combined
financial statements of City Truck from the operation of
equipment which was not acquired as part of the
acquisitions, net of related outsourcing costs. 219
-- The elimination of accounting, legal and other fees no
longer required as a result of the acquisitions. 111
-- Annualization of amortization related to goodwill and
intangible assets. (1,158)
-- Annualization of amortization related to deferred
financing fees. (1,723)
--------
Total selling, general and administrative adjustments (181)

(c) Reflects the pro forma adjustments to interest expense.
-- Interest on $100,000 notes at 12%. (12,000)
-- Interest expense related to borrowing under the term
loan at 8.6% to finance acquisitions and replace
existing debt. (2,081)
-- Elimination of previously recognized interest expense
and amortization. 6,519
-- Elimination of historical interest expense recognized
prior to acquisition which is replaced by borrowing
under the term loan above. 323
--------
Total interest expense adjustments (7,239)
(d) Represents the elimination of previously recognized
interest income. (645)
(e) Represents the net effect of adjusting income taxes to
our effective tax rate of 39.8%. We and most of the
acquired companies were previously taxed as S
corporations. 589
--------
Total pro forma net income effect $ (2,600)
========

424B3 41st Page of 423 TOC 1st Previous Next ↓Bottom Just 41st
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

(3) "Post 12/31/98 Acquisitions" represent the actual historical 1998 results
for companies acquired after December 31, 1998 and the application of pro
forma adjustments as if the acquisitions had been completed as of January
1, 1998. The table below summarizes the actual results and the effects of
the pro forma adjustments.

[Enlarge/Download Table]

Vantage Active Superior Certified California Wheels & Truck
Associated Tisco Parts Gear Truck Powertrain Equipment Brakes(1) QDSP(2) Fleetpride(3) City(3)
---------- ------ ------- ------ -------- ---------- ---------- --------- ------- ------------- -------

Net sales....... $57,039 $8,877 $55,012 $7,922 $3,640 $8,182 $6,409 $23,702 $67,490 $12,830 $8,411
Cost of sales... 35,960 6,659 43,820 5,197 2,065 5,143 4,178 16,820 45,234 8,436 5,520
------- ------ ------- ------ ------ ------ ------ ------- ------- ------- ------
Gross profit.... 21,079 2,218 11,192 2,725 1,575 3,039 2,231 6,882 22,256 4,394 2,891
Selling, general
and
administrative
expenses....... 16,967 1,474 8,531 1,886 1,276 1,913 2,202 6,096 19,685 4,336 2,185
------- ------ ------- ------ ------ ------ ------ ------- ------- ------- ------
Operating
Income......... 4,112 744 2,661 839 299 1,126 29 786 2,571 58 706
Interest
expense........ 781 36 585 191 -- -- 102 386 1,949 195 100
Interest
(income)....... -- (41) -- -- -- -- -- -- -- -- (18)
Other (income)
expense........ 12 (1) (11) (14) -- -- (5) 9 -- -- --
------- ------ ------- ------ ------ ------ ------ ------- ------- ------- ------
Income before
income taxes... 3,319 750 2,087 662 299 1,126 (68) 391 622 (137) 624
Income tax
expense
(benefit)...... 2 -- 825 -- -- -- -- 161 473 (39) 241
------- ------ ------- ------ ------ ------ ------ ------- ------- ------- ------
Net income
(loss)......... $ 3,317 $ 750 $ 1,262 $ 662 $ 299 $1,126 $ (68) $ 230 $ 149 $ (98) $ 383
======= ====== ======= ====== ====== ====== ====== ======= ======= ======= ======

[Enlarge/Download Table]

City Drive Clutch &
Wheatley(3) Universal(3) ASCO(3) Holt(3) SLM(3) Spring(3) Train(3) Brake(4) NETAS(4) TBS(4) Total
----------- ------------ ------- ------- ------- --------- -------- -------- -------- ------ --------

Net sales....... $5,851 $15,122 $7,108 $8,735 $36,945 $4,811 $3,316 $5,699 $1,964 $3,724 $352,789
Cost of sales... 3,725 9,548 5,251 6,107 25,668 3,097 1,967 3,381 1,292 2,696 241,764
------ ------- ------ ------ ------- ------ ------ ------ ------ ------ --------
Gross profit.... 2,126 5,574 1,857 2,628 11,277 1,714 1,349 2,318 672 1,028 111,025
Selling, general
and
administrative
expenses....... 1,789 4,525 1,290 2,498 8,688 1,365 1,093 1,845 533 1,000 91,177
------ ------- ------ ------ ------- ------ ------ ------ ------ ------ --------
Operating
Income......... 337 1,049 567 130 2,589 349 256 473 139 28 19,848
Interest
expense........ 5 86 105 136 434 74 60 -- 3 -- 5,228
Interest
(income)....... -- -- -- -- -- -- -- -- -- -- (59)
Other (income)
expense........ (8) (49) (15) 9 (203) (42) (35) -- -- -- (353)
------ ------- ------ ------ ------- ------ ------ ------ ------ ------ --------
Income before
income taxes... 340 1,012 477 (15) 2,358 317 231 473 136 28 15,032
Income tax
expense
(benefit)...... 135 23 -- -- 272 128 -- -- 61 10 2,292
------ ------- ------ ------ ------- ------ ------ ------ ------ ------ --------
Net income
(loss)......... $ 205 $ 989 $ 477 $ (15) $ 2,086 $ 189 $ 231 $ 473 $ 75 $ 18 $ 12,740
====== ======= ====== ====== ======= ====== ====== ====== ====== ====== ========

-------
(1) Amounts represent the results of operations of Wheels and Brakes from
January 1, 1998 to December 31, 1998.

(2) Amounts represent the consolidated results of operations of QDSP Holdings,
Inc. for the year ended December 31, 1998. Amounts include consolidated
results of operations for companies acquired before December 31, 1998
(Fleetpride, Truck City, Wheatley, Universal, ASCO, Holt, SLM,
City Spring, and Drive Train).

(3) Amounts represent the results of operations prior to acquisition for
companies acquired before December 31, 1998 by QDSP Holdings, Inc.

(4) Amounts represent the results of operations from January 1, 1998 to
December 31, 1998 for companies acquired by QDSP Holdings, Inc. subsequent
to December 31, 1998.

424B3 42nd Page of 423 TOC 1st Previous Next ↓Bottom Just 42nd
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

[Download Table]

Annual Pro Forma Pro Forma
Income Adjustments Effect
-------- ----------- ---------

Net sales............................. $352,789 $(2,324)(b) $350,465
Cost of sales......................... 241,764 (2,007)(b) 239,757
-------- ------- --------
Gross profit.......................... 111,025 (317)(b) 110,708
Selling, general and administrative
expenses............................. 91,177 (1,205)(c) 89,972
-------- ------- --------
Operating income...................... 19,848 888 20,736
Interest expense...................... 5,228 1,383 (d) 6,611
Interest (income)..................... (59) 59 (e) --
Other (income) expense................ (353) -- (353)
-------- ------- --------
Income before income taxes............ 15,032 (554) 14,478
Income tax expense (benefit).......... 2,292 3,470 (f) 5,762
-------- ------- --------
Net income (loss)..................... $ 12,740 (a) $(4,024) $ 8,716
======== ======= ========

424B3 43rd Page of 423 TOC 1st Previous Next ↓Bottom Just 43rd
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

[Enlarge/Download Table]

(a) Net income for companies acquired after December 31, 1998. $ 12,740

(b) Elimination of sales, cost of sales and gross profit for Stats
Remanufacturing Center, Inc. which has been sold and Power Equipment de
Mexico, S.A. de C.V. which has been closed. (317)
(c) Reflects the pro forma adjustments to selling, general and administrative
expenses.
-- Elimination of excess compensation, fringe benefits and related expenses
of existing employees based upon salaried amounts in employment
contracts entered into at the time of the acquisitions. 2,954
-- Elimination of rent and related expenses for leased property owned by
stockholders' which is no longer being leased to us, net of a
contractual increase in lease expense. 272
-- Elimination of accounting, legal and other fees no longer required as a
result of the acquisitions. 812
-- Elimination of selling, general and administrative expenses for Stats
Remanufacturing Center, Inc. which has been sold and Power Equipment de
Mexico, S.A. de C.V. which has been closed. 924
-- Elimination of management fees previously charged to Vantage Parts by
its prior parent company, net of expense being incurred to replace
allocated expenses. 688
-- Annualization of amortization related to goodwill and intangible assets.
(4,445)
--------
Total selling, general and administrative adjustments 1,205
(d) Reflects the pro forma adjustments to interest expense.
-- Interest expense related to borrowing under the term loan at 8.6% to
fund the acquisitions and replace existing debt. (4,342)
-- Interest expense related to borrowing under the revolving credit
facility at 8.1% to fund the acquisitions and replace existing debt. (2,267)
-- Elimination of historical interest expense which is replaced by
borrowing under the term loan and revolving credit facility above. 5,226
--------
Total interest expense adjustments (1,383)

(e) Represents the elimination of previously recognized interest income. (59)

(f) Represents the net effect of adjusting income taxes to our effective tax rate
of 39.8%. Most of the companies acquired were previously taxed as S
corporations or partnerships. (3,470)
--------
Total pro forma net income effect $ 8,716
========

424B3 44th Page of 423 TOC 1st Previous Next ↓Bottom Just 44th
CITY TRUCK HOLDINGS, INC.

PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Six Months Ended June 30, 1999
(In thousands)

[Download Table]

(1) (2) (3)
Pro Forma
Six Months
Actual Pro Forma Subtotal Post 6/30/99 Ended
6/30/99 Effect 1999 Acquisitions 6/30/99
-------- --------- -------- ------------ ----------

Net sales................ $141,530 $28,783 $170,313 $113,755 $284,068
Cost of sales............ 91,891 21,564 113,455 77,589 191,044
-------- ------- -------- -------- --------
Gross profit............. 49,639 7,219 56,858 36,166 93,024
Selling, general and
administrative
expenses................ 37,075 6,030 43,105 30,749 73,854
-------- ------- -------- -------- --------
Operating income......... 12,564 1,189 13,753 5,417 19,170
Interest expense......... 8,283 837 9,120 1,225 10,345
Interest (income)........ (217) 217 -- -- --
Other (income) expense... 41 73 114 (71) 43
-------- ------- -------- -------- --------
Income before income
taxes................... 4,457 62 4,519 4,263 8,782
Income tax expense
(benefit)............... 1,774 25 1,799 1,697 3,496
-------- ------- -------- -------- --------
Net income............... $ 2,683 $ 37 $ 2,720 $ 2,566 $ 5,286
======== ======= ======== ======== ========

(footnotes on following page)

424B3 45th Page of 423 TOC 1st Previous Next ↓Bottom Just 45th
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Six Months Ended June 30, 1999
(In thousands)

(1) "Actual 6/30/99" represents our actual historical results for the six
months ended June 30, 1999, including the results of acquisitions purchased
prior to June 30, 1999 from the date of acquisition.

(2) "Pro Forma Effect" represents the actual historical 1999 results through
June 30, 1999 prior to the date of acquisition for companies acquired prior
to June 30, 1999 and the application of pro forma adjustments to the
historical financial statements of the companies owned as of June 30, 1999
as if the acquisitions and associated refinancings of debt and equity had
been completed on January 1, 1999. The tables below summarize the
historical results prior to acquisition and the effects of the pro forma
adjustments.

[Download Table]

Vantage Active Superior
Associated Tisco Parts Gear Truck Total
---------- ----- ------- ------ -------- -------

Net sales............... $1,388 $136 $23,179 $2,466 $1,614 $28,783
Cost of sales........... 853 95 18,096 1,551 969 21,564
------ ---- ------- ------ ------ -------
Gross profit............ 535 41 5,083 915 645 7,219
Selling, general and
administrative
expenses............... 482 53 4,077 771 569 5,952
------ ---- ------- ------ ------ -------
Operating income........ 53 (12) 1,006 144 76 1,267
Interest expense........ 32 1 160 44 -- 237
Interest (income)....... -- (1) (24) -- -- (25)
Other (income) expense.. 77 (4) -- 73
------ ---- ------- ------ ------ -------
Income before income
taxes.................. 21 (12) 793 104 76 982
Income tax expense
(benefit).............. -- -- -- -- -- --
------ ---- ------- ------ ------ -------
Net income (loss)....... $ 21 $(12) $ 793 $ 104 $ 76 $ 982
====== ==== ======= ====== ====== =======

[Download Table]

Income
Prior to Pro Forma Pro Forma
Acquisition Adjustments Effect
----------- ----------- ---------

Net sales............................. $28,783 $28,783
Cost of sales......................... 21,564 21,564
------- ----- -------
Gross profit.......................... 7,219 7,219
Selling, general and administrative
expenses............................. 5,952 $ 78 (b) 6,030
------- ----- -------
Operating income...................... 1,267 (78) 1,189
Interest expense...................... 237 600 (c) 837
Interest (income)..................... (25) 242 (d) 217
Other (income) expense................ 73 -- 73
------- ----- -------
Income before income taxes............ 982 (920) 62
Income tax expense (benefit).......... -- 25 (e) 25
------- ----- -------
Net income (loss)..................... $ 982 (a) $(945) $ 37
======= ===== =======

--------

[Download Table]

(a) Net income earned prior to acquisition. $982

(b) Reflects the pro forma adjustments to selling, general and
administrative expenses:
-- Elimination of excess compensation, fringe benefits and
related expenses of existing employees based upon salaried
amounts in employment contracts entered into at the time of
the acquisitions. 84
-- Elimination of rent and related expenses for leased property
owned by stockholders' which is no longer being leased to us,
net of a contractual increases in lease expense. 9

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

[Download Table]

-- Elimination of management fees previously charged to
Vantage Parts by its prior parent company, net of expense
being incurred to replace allocated expenses. 334
-- Elimination of accounting, legal and other fees no longer
required as a result of the acquisitions. 63
-- Annualization of amortization related to goodwill and
intangible assets. (274)
-- Annualization of amortization related to deferred
financing fees. (294)
-------
Total selling, general and administrative adjustments (78)
(c) Reflects the pro forma adjustments to interest expense.
-- Interest on $100,000 notes at 12%. (6,000)
-- Interest expense related to borrowing under the term loan
at 8.6% to finance acquisitions and replace existing
debt. (3,120)
-- Elimination of previously recognized interest expense
which is replaced by borrowing under the term loan above. 8,520
-------
Total interest expense adjustments (600)

(d) Represents the elimination of previously recognized interest
income. (242)
(e) Represents the net effect of adjusting income taxes to our
effective tax rate of 39.8%. Most of the companies acquired
were previously taxed as S corporations or partnerships. (25)
-------
Total pro forma net income effect $ 37
=======

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

(3) "Post 6/30/99 Acquisitions" represent the actual historical results for the
six months ended June 30, 1999 for companies acquired after June 30, 1999
and the application of pro forma adjustments as if the acquisitions had been
completed as of January 1, 1999. The table below summarizes the actual
results and the effects of the pro forma adjustments.

[Enlarge/Download Table]

Certified California Wheels & Clutch &
Powertrain Equipment Brakes QDSP Brake NETAS TBS Total
---------- ---------- -------- ------- -------- ----- ---- --------

Net sales............... $4,133 $3,435 $12,803 $91,983 $1,013 $424 $539 $114,330
Cost of sales........... 2,629 2,290 9,032 62,973 542 270 339 78,075
------ ------ ------- ------- ------ ---- ---- --------
Gross profit............ 1,504 1,145 3,771 29,010 471 154 200 36,255
Selling, general and
administrative
expenses............... 785 1,207 3,473 23,828 238 120 197 29,848
------ ------ ------- ------- ------ ---- ---- --------
Operating income........ 719 (62) 298 5,182 233 34 3 6,407
Interest expense........ -- -- -- 2,425 -- -- -- 2,425
Interest (income)....... -- -- -- -- -- -- -- --
Other (income) expense.. -- (71) -- -- -- -- -- (71)
------ ------ ------- ------- ------ ---- ---- --------
Income before income
taxes.................. 719 9 298 2,757 233 34 3 4,053
Income tax expense
(benefit).............. -- 2 -- 1,521 -- -- 1,523
------ ------ ------- ------- ------ ---- ---- --------
Net income (loss)....... $ 719 $ 7 $ 298 $ 1,236 $ 233 $ 34 $ 3 $ 2,530
====== ====== ======= ======= ====== ==== ==== ========

[Download Table]

Annual Pro Forma Pro Forma
Income Adjustments Effect
-------- ----------- ---------

Net sales............................. $114,330 $ (575)(b) $113,755
Cost of sales......................... 78,075 (486)(b) 77,589
-------- ------- --------
Gross profit.......................... 36,255 (89) 36,166
Selling, general and administrative
expenses............................. 29,848 901 (c) 30,749
-------- ------- --------
Operating income...................... 6,407 (990) 5,417
Interest expense...................... 2,425 (1,200)(d) 1,225
Interest (income)..................... -- -- --
Other (income) expense................ (71) -- (71)
-------- ------- --------
Income before income taxes............ 4,053 210 4,263
Income tax expense (benefit).......... 1,523 174 (e) 1,697
-------- ------- --------
Net income (loss)..................... $ 2,530 (a) $ 36 $ 2,566
======== ======= ========

--------

[Download Table]

(a) Net income for companies acquired after June 30, 1999. $ 2,530

(b) Elimination of sales, cost of sales and gross profit for Stats
Remanufacturing Center, Inc. which has been sold and Power
Equipment de Mexico, S.A. de C.V. which has been closed. (89)

Reflects the pro forma adjustments to selling, general and
(c) administrative expenses.
--Elimination of excess compensation, fringe benefits and
related expenses of existing employees based upon salaried
amounts in employment contracts entered into at the time of
the acquisitions. 63
--Elimination of rent and related expenses for leased property
owned by stockholders' which is no longer being leased to us. 1
--Elimination of accounting, legal and other fees no longer
required as a result of the acquisitions. 3
--Elimination of selling, general and administrative expense
for Stats Remanufacturing Center, Inc. which has been sold and
Power Equipment de Mexico, S.A. de C.V. which has been closed. 270
--Annualization of amortization related to goodwill and
intangible assets. (1,238)
-------
Total selling, general and administrative adjustments (901)

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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT--(Continued)

[Download Table]

(d) Reflects the pro forma adjustments to interest expense.
--Interest expense related to borrowing under the revolving
credit facility at 8.1% to fund the acquisitions of Certified
Powertrain, California Equipment and Wheels & Brakes. (1,225)
--Elimination of historical interest expense which is replaced
by borrowing under the revolving credit facility above. 2,425
-------
Total interest expense adjustments. 1,200

(e) Represents the net effect of adjusting income taxes to our
effective tax rate of 39.8%. Most of the companies acquired
were previously taxed as S corporations. (174)
-------
Total pro forma net income effect $ 2,566
=======

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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA

The selected audited financial data of Holdings and its subsidiaries for the
years ended December 31, 1996, 1997 and 1998 set forth below are derived from
the more detailed financial statements and related notes of Holdings and its
subsidiaries included elsewhere in this prospectus. The unaudited financial
data of Holdings and subsidiaries for the years ended December 31, 1994 and
1995 and the six months ended June 30, 1998 and 1999 are derived from unaudited
financial statements of Holdings and its subsidiaries, which are prepared on
the same basis as the audited financial statements and, in the opinion of
management, reflect all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of data. In addition, Holdings
and its subsidiaries operated throughout the periods presented as independent,
privately owned entities, which influenced the historical level of owners'
compensation and other expenses. Accordingly, the historical results of
operations include (1) historical compensation expenses in excess of the
current compensation levels to the former owners of Holdings and its
subsidiaries, (2) other private company expenses and (3) no accrual for federal
income taxes before May 29, 1998. Therefore, the historical results discussed
below do not represent HDA's results had Holdings and its subsidiaries been
combined and operated under common ownership during that period. The
comparative financial data for 1994, 1995, 1996 and 1997 include only the
combined operations of City Truck and its subsidiaries and affiliated
companies. The 1998 and 1999 financial data also includes the operations of
Stone, Truck & Trailer, Connecticut Driveshaft, Truckparts, Tampa Brake,
Associated, Tisco, Active Gear and Superior Truck from their dates of
acquisition. The financial data set forth below should be read in conjunction
with the financial statements and related notes and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," all included
elsewhere in this prospectus.

[Enlarge/Download Table]

Six Months Ended
Year Ended December 31, June 30,
-------------------------------------------- -----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- ------- -------- ------- --------
(In thousands, except location and ratio data)

Income Statement Data:
Sales.................. $44,751 $50,063 $52,609 $57,837 $103,295 $33,755 $141,530
Cost of sales.......... 28,706 31,981 33,283 36,611 65,855 20,832 91,891
------- ------- ------- ------- -------- ------- --------
Gross profit........... 16,045 18,082 19,326 21,226 37,440 12,923 49,639
Selling, general and
administrative
expenses.............. 12,009 13,592 14,390 16,143 31,030 9,308 37,075
------- ------- ------- ------- -------- ------- --------
Income from
operations............ 4,036 4,490 4,936 5,083 6,410 3,615 12,564
Interest expense, net.. 31 31 628 776 5,895 596 8,066
Other (income)
expense............... (24) 4 (40) (58) (86) (79) 41
Income tax expense
(benefit)(1).......... 29 37 53 93 (687) 292 1,774
------- ------- ------- ------- -------- ------- --------
Net income............. $ 4,000 $ 4,418 $ 4,295 $ 4,272 $ 1,288 $ 2,806 $ 2,683
======= ======= ======= ======= ======== ======= ========
Supplemental pro forma
income data:
Pro forma income
taxes................. $ 1,604 $ 1,773 $ 1,731 $ 1,737 $ 239 $ 1,233 $ 1,774
Pro forma net income... 2,425 2,682 2,617 2,628 362 1,865 2,683
Balance Sheet Data:
Cash and cash
equivalents........... $ 2,985 $ 227 $ 152 $ 191 $ 8,328 $ 1,292 $ 7,771
Net working
capital(2)............ 12,127 12,176 12,403 13,872 43,387 29,649 81,370
Total assets........... 22,433 26,145 28,915 33,203 163,924 69,037 288,236
Total debt (including
current maturities)... 3,095 11,898 13,184 13,056 118,361 52,327 166,900
Stockholders' equity... 15,169 7,580 9,593 12,018 16,474 5,000 78,823
Other Data:
Capital
expenditures(3)....... $ 829 $ 1,234 $ 4,301 $ 1,627 $ 1,668 $ 442 $ 2,533
Number of locations.... 12 15 16 17 57 35 93
Ratio of earnings to
fixed charges......... 18.3x 15.1x 5.6x 5.1x 1.1x 5.0x 1.5x

--------------------
(1) Holdings and its subsidiaries were comprised solely of sub-chapter "S'
corporations prior to the recapitalization in 1998.

(2) Net working capital equals current assets less current liabilities.

(3) Capital expenditures for 1996 include $3.7 million related to the
construction of City Truck's new corporate offices and distribution center
in Birmingham, Alabama.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with
"Selected Historical Financial and Operating Data" and our financial statements
and related notes included elsewhere in this prospectus. Certain statements
contained in Management's Discussion and Analysis of Financial Condition and
Results of Operations constitute forward-looking statements which are described
in the section entitled "Disclosure Regarding Forward-Looking Statements."

See "Risk Factors" for information concerning the factors that affect our
markets, our products, our profitability, our liquidity, restrictions on us
imposed by our debt agreements and other factors that may affect us in the
future.

General

Holdings is our parent company and has no separate operations. Its only asset
is its investment in us and equity in our earnings recorded and it has no
liabilities. Holdings is contingently liable for its guarantee of our debt.
Holdings' historical financial statements are identical to ours except with
respect to the accounts which comprise the stockholders' equity section of the
balance sheet.

Our historical financial data prior to 1998 reflect only City Truck's
financial results. Our financial data includes City Truck's results for all
periods and the following from the dates of acquisition:

[Download Table]

Date of
Company Acquisition
------- -----------

Stone.................................................. June 19, 1998
Truck & Trailer Parts.................................. September 30, 1998
Tampa Brake............................................ October 31, 1998
Connecticut Driveshaft................................. November 4, 1998
Truckparts............................................. December 17, 1998
Associated............................................. January 11, 1999
Tisco.................................................. January 12, 1999
Active Gear............................................ April 20, 1999
Vantage Parts.......................................... May 28, 1999
Superior Truck......................................... June 7, 1999

Accordingly, our historical financial results are not comparable for any
period that includes periods after June 30, 1998. Our historical financial
statements do not include the results of companies we acquired after June 30,
1999: Certified Powertrain, California Equipment, QDSP and Wheels and Brakes.

City Truck, prior to June 1, 1998, and the other acquired businesses, prior
to their acquisitions, operated as family owned entities, which influenced the
historical level of owners' compensation and other expenses. Accordingly, the
historical results of operations include historical compensation expenses in
excess of the current compensation levels to the former owners and certain
other private company expenses. In addition, we believe the combined companies
will benefit from:

. increased access to capital;

. the support of experienced and professional management;

. centrally coordinated purchasing;

424B3 51st Page of 423 TOC 1st Previous Next ↓Bottom Just 51st
. the elimination of certain duplicative distribution and operating costs;

. cross-selling opportunities; and

. the enhanced capacity to service large national and regional accounts.

The historical results discussed below do not represent our results had all of
the acquired entities been combined and operated under common ownership during
that period. See "Business--HDA Parts System, Inc." for a general description
of our business

Our sales consist primarily of parts sales, including remanufactured parts,
and installation and repair income. Parts sales include the sales of parts,
supplies, accessories and equipment for heavy duty vehicles and equipment,
including braking, steering and suspension systems, transmissions, drivelines,
axles, wheels and rims, hydraulic systems and engines. Remanufacturing revenues
are derived from the sales of brake shoes, drivelines, hydraulic systems,
transmissions and rear axles which have been remanufactured. Service revenues
are derived from providing repair service to vehicles and equipment and
installing parts, supplies and equipment. Same location sales are calculated to
include a new location after a full calendar year of operations.

Our cost of sales consist of the cost of parts, supplies and equipment sold,
freight related thereto, and direct labor costs incurred to provide
remanufacturing and service, partially offset by volume-related rebates
received from component manufacturers and buying cooperatives.

Our selling, general and administrative expenses include the cost of
personnel conducting sales, warehousing, delivery and administrative
activities, including commissions and other forms of incentive compensation,
advertising and marketing expenses, depreciation and amortization expenses,
rent, delivery expenses, repairs, utilities, maintenance costs, professional
fees, property taxes and other costs not included in cost of sales that are
attributable to operations.

Results of Operations

The following table summarizes our historical results of operations for the
fiscal years ended December 31, 1996, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 (In millions):

[Enlarge/Download Table]

Unaudited Six Months
Fiscal Year Ended June 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ------------- ----------- ------------
$ % $ % $ % $ % $ %
----- ----- ----- ----- ------ ----- ----- ----- ------ -----

Sales................... $52.6 100.0% $57.8 100.0% $103.3 100.0% $33.8 100.0% $141.5 100.0%
Gross profit............ 19.3 36.7 21.2 36.7 37.4 36.2 12.9 38.2 49.6 35.1
SG&A expenses........... 14.4 27.4 16.1 27.9 31.0 30.0 9.3 27.5 37.0 26.1
Income from operations.. 4.9 9.3 5.1 8.8 6.4 6.2 3.6 10.7 12.6 8.9
Interest expense, net... 0.6 1.1 0.8 1.4 5.9 5.7 0.5 1.5 8.1 5.7
Other income............ 0.1 0.2 0.1 0.2 0.1 0.1 -- -- -- --
Income tax expense
(benefit).............. 0.1 0.2 0.1 0.2 (0.7) 0.7 0.3 0.9 1.8 1.3
Net income.............. 4.3 8.2 4.3 7.4 1.3 1.3 2.8 8.3 2.7 1.9
Supplemental pro forma
income taxes........... 1.7 3.2 1.8 3.1 0.2 0.2 1.2 3.6 1.8 1.3
Supplemental pro forma
net income............. 2.7 5.1 2.6 4.5 0.4 0.4 1.9 5.6 2.7 1.9

424B3 52nd Page of 423 TOC 1st Previous Next ↓Bottom Just 52nd
Comparison of Results of Operations

Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998

Sales. Sales for the six months ended June 30, 1999 increased to $141.5
million from $33.8 million for the same period in 1998, an increase of 318.6%.
The sales growth is attributable to the acquisitions completed in 1998 and
1999. The acquisitions were all completed after the second quarter of 1998,
with the exception of Stone, which was acquired on June 19, 1999. Same location
sales growth for the six month period was 4.3%.

Gross profit. Gross profit increased to $49.6 million for the first six
months of 1999 from $12.9 million in 1998, an increase of 284.5%, as a result
of our acquisitions. As a percentage of sales, our gross profit decreased to
35.1% in 1999 from 38.2% in 1998. The lower margin reflects the impact of
revenue from acquired companies with lower margins.

SG&A expenses. SG&A expenses increased to $37.0 million in 1999 from $9.3
million in 1998, an increase of 297.9%. As a percentage of sales, SG&A expenses
decreased to 26.1% in 1999 from 27.5% in 1998. The decrease in SG&A expenses as
a percentage of sales is the result of cost containment measures which reduced
expense growth, reductions in duplicate facilities and acquired companies with
lower SG&A as a percent of sales partially offset by acquired amortization of
goodwill and intangibles relating to the acquired companies and corporate
expenses.

Income from operations. Income from operations increased to $12.6 million in
1999 from $3.6 million in 1998, an increase of 250.0%. As a percentage of
sales, income from operations decreased to 8.9% from 10.7%. The decrease in
income from operations as a percentage of sales is primarily due to the lower
margin companies acquired and corporate expenses.

Interest expense. Interest expense increased to $8.1 million in 1999 from
$0.5 million in 1998. The increase was the result of higher debt incurred to
complete acquisitions in 1998 and January 1999. Debt at June 30, 1999 primarily
consisted of $100.0 million of senior subordinated notes and $66.8 million of
borrowings under the revolving credit facility. Comparably, long term debt at
June 30, 1998 was $52.0 million, however, all but approximately $12.0 million
was incurred on or after June 1, 1998.

Income tax expense. Income tax expense was $1.8 million in 1999 compared to
$0.3 in 1998. The increase was the result of income from acquired companies and
a change to C corporation status on June 1, 1998. Prior to that time, we were
taxed as an S corporation.

Net income. Net income for the first six months of 1999 decreased to $2.7
million from $2.8 million in 1998 primarily due to acquired amortization,
corporate expenses, higher interest expense and higher income tax expense
offset by income from acquired companies as discussed above.

Supplemental pro forma income taxes. Pro forma income taxes were $1.8 million
in 1999 compared to pro forma income taxes of $1.2 million in 1998. The higher
expense results from higher earnings due to income from acquired companies,
cost containment measures, reductions in duplicate facilities and acquired
companies with lower SG&A as a percent of sales as discussed above.

Supplemental pro forma net income. Pro forma net income increased to $2.7
million for the six months ended June 30, 1999 from pro forma net income of
$1.9 million in 1998 primarily due to income from acquired companies, cost
containment measures, reductions in duplicate facilities and acquired companies
with lower SG&A as a percent of sales as discussed above.

424B3 53rd Page of 423 TOC 1st Previous Next ↓Bottom Just 53rd
Fiscal Year 1998 Compared to Fiscal Year 1997

Sales. Sales increased to $103.3 million in 1998 from $57.8 million in 1997,
an increase of 78.7%. The overall sales growth is attributable to the
acquisitions of Stone, Truck & Trailer, Tampa Brake, Connecticut Driveshaft and
Truckparts, which combined contributed $39.7 million to 1998 sales. Excluding
acquisitions, the sales increase was 10.0% which is attributable to the full
year impact of the location opened in Jackson, Mississippi in May 1997 and an
increase in sales at the Mobile, Alabama and Monroeville, Alabama locations due
to targeted sales initiatives. Same location sales growth, only at City Truck
was 7.8% in 1998.

Gross profit. Gross profit increased to $37.4 million in 1998 from $21.2
million in 1997, an increase of 76.4%. Excluding acquisitions, gross profit
increased by 12.7% to $23.9. As a percentage of sales, our gross profit
decreased to 36.2% in 1998 from 36.7% in 1997 reflecting the impact of revenue
from acquired businesses with lower margins. Excluding acquisitions, margins
increased to 37.6% due to higher vendor rebates.

SG&A expenses. SG&A expenses increased to $31.0 million in 1998 from $16.1
million in 1997, an increase of 92.5%. As a percentage of sales, SG&A expenses
increased to 30.0% in 1998 from 27.9% in 1997. The increase in SG&A expenses as
a percentage of sales is primarily the result of acquisition related
amortization expense, primarily goodwill and incremental overhead resulting
from establishing a corporate staff and corporate office. We expect to incur
increased SG&A expenses in 1999 resulting from having a corporate staff and
corporate office for the full year. Excluding acquired amortization and
corporate expenses, SG&A as a percent of sales decreased to 27.2% due to an
increase in sales without a similar increase in SG&A which includes overhead
and other fixed expenses.

Income from operations. Income from operations increased to $6.4 million in
1998 from $5.1 million in 1997, an increase of 25.5%. As a percentage of sales,
income from operations decreased to 6.2% from 8.8%. The decrease in income from
operations as a percentage of sales is primarily due to higher SG&A expenses as
a percent of sales. Excluding amortization and corporate expenses, income from
operations as a percentage of sales increased to 9.0%.

Interest expense. Interest expense increased to $5.9 million in 1998 from
$0.8 million in 1997, due to the $100.0 million of senior subordinated notes we
issued and increased borrowing under our revolving credit facility, primarily
to finance acquisitions completed in 1998.

Income tax expense (benefit). We recorded an income tax benefit of $0.7
million in 1998 compared to an expense of $0.1 million in 1997. Prior to June
1, 1998, we were taxed as an S corporation and as a result of the change to C
corporation status, a net deferred tax asset of $15.1 million was created, of
which $887 has been credited to the income statement, creating the income tax
benefit. The remainder, $14.2 million, has been credited to paid-in capital.

Net Income. Net income decreased to $1.3 million in 1998 from $4.3 million in
1997, a decrease of 69.8%. The decrease is due primarily to the factors
discussed above.

Supplemental pro forma income taxes. Pro forma income taxes were $0.2 million
in 1998 compared to pro forma income taxes of $1.8 million in 1997. The lower
expense results from lower earnings due to lower margin companies acquired,
acquired amortization, corporate expenses and higher interest expense as
discussed above.

424B3 54th Page of 423 TOC 1st Previous Next ↓Bottom Just 54th
Supplemental pro forma net income. Pro forma net income decreased to $0.4
million in 1998 from pro forma net income of $2.6 million in 1997 primarily due
to lower margin companies acquired, acquired amortization, corporate expenses
and higher interest expense as discussed above.

Fiscal Year 1997 Compared to Fiscal Year 1996

Sales. Sales increased to $57.8 million in 1997 from $52.6 million in 1996,
an increase of 9.9%. The sales growth is primarily attributable to the opening
of a new location in Jackson, Mississippi in May 1997, the full year impact of
the location opened in Monroeville, Alabama in September 1996 and an increase
in sales at the Mobile, Alabama location due to targeted sales initiatives.
Same location sales growth was 7.2% in 1997.

Gross profit. Gross profit increased to $21.2 million in 1997 from $19.3
million in 1996, an increase of 9.8%. As a percentage of sales, the Company's
gross profit remained constant between the corresponding periods at 36.7%.

SG&A expenses. SG&A expenses increased to $16.1 million in 1997 from $14.4
million in 1996, an increase of 11.8%. As a percentage of sales, SG&A expenses
increased to 27.9% in 1997 from 27.4% in 1996. The increase in SG&A expenses as
a percentage of sales is primarily the result of the incremental overhead
resulting from the relocation of City Truck's corporate offices and
distribution center to a larger facility in Birmingham, Alabama in October
1996.

Income from operations. Income from operations increased to $5.1 million in
1997 from $4.9 million in 1996, an increase of 4.1%. As a percentage of sales,
income from operations decreased to 8.8% from 9.3%. The decrease in income from
operations as a percentage of sales is primarily due to higher SG&A expenses as
a percent of sales.

Interest expense. Interest expense increased to $0.8 million in 1997 from
$0.6 million in 1996 due to marginally higher average borrowings in 1997.

Income tax expense. Income tax expense was $0.1 million for 1997 and 1996.
During 1997 and 1996, we were taxed as an S corporation and paid taxes to only
those states that do not permit businesses to be taxed as S corporations.

Net Income. Net income remained relatively unchanged from 1997 to 1996.

Supplemental pro forma income taxes. Pro forma income taxes were $1.8 million
in 1997 and $1.7 million in 1996. Earnings were unchanged from 1996 to 1997 as
higher sales and gross profit were offset by an increase in SG&A expenses.

Supplemental pro forma net income. Pro forma net income was $2.6 million in
1997 and $2.7 million in 1996. Higher sales and gross profit in 1997 were
offset by an increase in SG&A expenses primarily due to incremental overhead
costs associated relocating the corporate headquarters as discussed above.

Liquidity and Capital Resources

City Truck historically used internal cash flow from operations to fund its
working capital requirements and capital expenditures and new branch locations.
We historically have had relatively low capital expenditure requirements since
we lease all but six of our 92 facilities. We spent on a pro forma (includes
all acquisitions and probable acquisitions) combined basis $5.2 million in 1998

424B3 55th Page of 423 TOC 1st Previous Next ↓Bottom Just 55th
and $3.7 million for the six months ended June 30, 1999 on capital
expenditures. We also historically have paid dividends and distributions to
stockholders. However, we do not anticipate that we will pay dividends for the
foreseeable future. In 1998 and 1999 we funded our substantial acquisition
program with the proceeds from equity offerings and long-term borrowings.

We financed the recapitalization of City Truck, the acquisition of Stone and
the refinancing of the existing indebtedness of City Truck and Stone with:

. $52.0 million of borrowings under the revolving credit facility;

. $6.0 million of interim financing provided through the purchase of
securities by Brentwood; and

. the purchase by Brentwood and other investors of $10.2 million of our
series B preferred stock and common stock.

In addition, Brentwood purchased outstanding common stock of City Truck for $20
million in connection with the recapitalization.

On July 31, 1998, we issued our $100.0 million senior subordinated notes. We
used the net proceeds from the sale of these notes, which totaled approximately
$96.0 million, as follows:

. approximately $52.0 million to repay outstanding indebtedness under the
revolving credit facility; and

. approximately $6.0 million to redeem the interim securities purchased by
Brentwood, leaving approximately $38.0 million for general corporate
purposes.

After July 31, 1998, we spent $50 million for the acquisitions of Truck &
Trailer Parts, Tampa Brake, Connecticut Driveshaft and Truckparts. We borrowed
an additional $18.2 million under the revolving credit facility to complete
these acquisitions.

In January 1999, we secured $52.5 million of commitments for a private equity
offering consisting of series A preferred stock and common stock of Holdings.
Brentwood committed $15.0 million and other investors committed $37.5 million.
In January 1999, we received $10.5 million of the equity to partially finance
the acquisitions of Associated and Tisco and borrowed $49.3 million under the
revolving credit facility to finance the balance and an additional $4.0 million
for working capital. In April 1999, we received the remaining equity
commitments of $42.0 million which we used to finance the Vantage Parts, Active
Gear and Superior Truck acquisitions and for general corporate purposes.

Our $85.0 million revolving credit facility had undrawn availability of $66.8
million at December 31, 1998 and $18.3 million of undrawn availability at June
30, 1999. On September 30, 1999, our $85.0 million revolving credit facility
was replaced by a new $225.0 million senior secured credit facility.

On September 30, 1999, we entered into a new $225.0 million senior secured
credit facility. The facility will be made available in the form of a five-year
$150.0 million revolving credit facility and a five-year $75.0 million term
loan. We used the term loan and a portion of the $150.0 million revolving
credit facility to refinance existing bank indebtedness of HDA and QDSP, to pay
fees and expenses related to the QDSP merger, to fund the acquisition of Wheels
and Brakes and for general corporate purposes. On September 30, 1999, $46.5
million was outstanding under our $150.0 million revolving credit facility. We
intend to use the remaining portion of our $150.0 million revolving credit
facility for general corporate purposes, including acquisitions. The effective
rate of interest on our term loan and revolving credit facility as of September
30, 1999 was approximately 9.2% per year. For a more detailed description of
the terms of the credit facility, see "Description of Credit Facility."

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Upon consummation of our merger with QDSP and after giving effect to the
additional issuance of common and preferred stock for cash, holders of existing
QDSP common and preferred stock received consideration, in the form of common
and preferred stock of Holdings, valued at $72.5 million in the aggregate. In
connection with the merger, Aurora and Brentwood made a combined cash equity
contribution of $40.0 million to Holdings.

We intend to continue to pursue a strategy to become the largest national
distributor of heavy duty vehicle parts, with a focus on building a national
system of branch locations primarily through acquisitions. We expect to fund
our working capital needs, capital expenditures and future acquisitions through
availability under our credit facility, future issuances of debt or equity
securities and cash flow generated from operations. However, our ability to
execute our growth strategy and to make scheduled payments of interest or
principal or to refinance our indebtedness will depend upon our future
operating performance, which will be affected by general economic, financial,
competitive, legislative, regulatory, business and other factors beyond our
control. For a more detailed description of these factors, see "Risk Factors--
If we breach the terms of our debt, it could prevent us from fulfilling our
obligations under the notes" and "Description of Credit Facility."

Effect of Inflation; Seasonality

Inflation has not had a significant effect on our results of operations in
recent years. Our selling, general and administrative expenses, such as
salaries, employee benefits, and facilities costs are subject to normal
inflationary pressures.

Many of our customers have a reduced number of working days in the fourth
quarter resulting from public holidays. As a result, we have lower sales in
that quarter than in the other quarters. With the exception of the fourth
quarter, our operations are generally not affected by seasonal fluctuations.

Year 2000 Issue

The Year 2000 issue relates to the inability of computer programs and
business equipment to properly process dates after December 31, 1999 and other
date combinations which have or once had special meaning in data file
processing. As a result, businesses may be at risk for miscalculations and
system failures.

In response to the Year 2000 issue, we initiated a series of projects to
identify, evaluate and implement necessary changes to our computerized business
systems, including our branch operating systems, and business equipment. We
have completed a review of all of our systems and equipment including vehicles,
manufacturing equipment and security, telephone and other systems. We examined
the importance of each category, the remediation necessary to make the category
compliant, the resources necessary to complete the remediation and a time frame
for completion.

We are addressing our software, hardware, and equipment issues primarily by
installing a Year 2000 compliant product at all of our operating locations. In
a limited number of cases, we will replace business equipment with Year 2000
compliant hardware. We have completed 80% of our hardware and equipment
remediation or replacement, and 70% of our software remediation or replacement.
The remediation and replacement process is proceeding as planned and we expect
to be fully compliant by November 30, 1999. We do not believe that any of our
systems or business equipment have critical dates prior to that time.

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We estimate the cost of the project to be less than $400,000, and we have not
made any material expenditures due solely to Year 2000 issues. Year 2000
compliance is an element of our strategic systems plan. We have planned all
systems implementations to enhance our business and address Year 2000 issues as
a matter of course.

Notwithstanding the above projects, our greatest risk and most reasonably
likely worst case scenario is with our branch operating application systems. If
the branch systems experience problems, it could disrupt our basic distribution
operations until we resolve the issue. To address this risk, we will be closed
for business Saturday, January 1, 2000 and Sunday, January 2, 2000. We will
test all material systems in production operation during this time with on site
support from, and in cooperation with, the software vendor. On December 31,
1999, without disrupting our normal business, we will print out all customer
orders scheduled to be shipped through January 13, 2000. We will also print a
price list which will enable us to manually conduct our business through
January 13, 2000. In addition, we are able to distribute software updates to
all of our processing centers and branch locations within a few hours. Should
our worst case scenario occur, we estimate the aggregate cost to us would be
$0.5 million.

If modifications and conversions by us and by those with whom we conduct
business are not completed in a timely manner, the Year 2000 issue may have a
material adverse effect on our business, financial condition and results of
operations. While we have endeavored to obtain assurances from our product
suppliers that they are adequately addressing the Year 2000 issue, we may
experience minimal interruptions in replenishment from some suppliers.

Our contingency plans include:

. retaining alternate software suppliers in the event that our primary
system fails the Year 2000 testing we currently have in progress, despite
written assurances from the vendor that the system is Year 2000
compliant;

. identifying alternate sources of supply for selected merchandise; and

. selectively increasing inventory for highly sensitive items.

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BUSINESS

HDA Parts System, Inc.

We believe that we are the largest and fastest growing independent
distributor in the highly fragmented $17 billion heavy duty vehicle parts and
repair industry. We distribute parts to over 25,000 customers through 173
branch locations across 31 states. Based on both sales and number of branch
locations, we are the largest independent distributor in the nation.

We purchase replacement parts for heavy duty vehicles from component
manufacturers, inventory a broad selection of these parts and deliver them
directly to customer locations from our branches or sell them "over-the-
counter" to customers who visit our branches. Our 173 branch locations consist
primarily of warehouse and service space, with a small retail selling space. A
typical location averages 10,000 square feet. Our breadth of product inventory
generally enables us to provide delivery customers with parts within 24 hours
and to provide over-the-counter customers with parts immediately. We maintain a
fleet of delivery vehicles that makes daily scheduled deliveries to customers,
picks up used parts for remanufacture or repair and makes other delivery stops
for special orders. By offering reliable and timely availability of a wide
range of heavy duty vehicle parts, we allow our customers to reduce their
investment in inventories and minimize lost productivity and other costs
associated with vehicle and equipment downtime.

We carry a comprehensive selection of heavy duty vehicle parts including
braking, steering and suspension systems, transmissions, drivelines, axles,
wheels and rims, hydraulic systems and engine components. Our customers use
these parts for regular preventative maintenance, such as replacement of worn
brake shoes and air and oil filters, and for repairs of damaged parts. To
complement our parts distribution business, we provide our customers with
value-added services, such as extensive remanufacturing capabilities and
machine shop services. Our remanufacturing facilities allow us to offer our
customers a timely and reliable source of high quality parts. We operate 30
facilities which reline brake shoes and 29 facilities which rebuild
transmissions, rear axles and other components.

Industry Overview

. Expanding fleet of heavy duty vehicles. The population of heavy duty
vehicles increased from approximately 6.6 million in 1992 to
approximately 7.7 million in 1997, a 15.9% increase, and is projected to
reach 8.6 million by 2002.

. Increased life expectancy of fleet vehicles. The life expectancy of the
average fleet vehicle has grown 62% from 451,000 miles in 1978 to
approximately 730,000 miles in recent years. In addition, the expanding
population of trucks in prime repair age, 5 to 13 years old, is expected
to increase from 32.6 million in 1996 to 39.2 million by 2001, an
increase of over 20%, leading to an expected increase in demand for
replacement parts and service.

. Increased total truck miles driven annually. Annual truck miles driven
steadily increased from 2.0 billion in 1988 to 2.5 billion in 1997, a
24.9% increase. Over this period, the number of annual truck miles driven
never declined year over year.

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. Increased outsourcing of parts inventory management by fleet
operators. We believe that heavy duty vehicle fleet operators are
increasingly outsourcing parts inventory management and service work and
concentrating supplier relationships in favor of a limited number of
integrated single-source suppliers. We believe that full service
independent distributors with a broad network of branch locations are
well positioned to capitalize on this outsourcing trend.

The independent heavy duty vehicle parts and repair industry is highly
fragmented, and we believe it is in the early stages of consolidation. Most of
the approximately 2,000 independent distributors and thousands of repair shops
in the industry are small, owner-operated businesses with limited access to the
capital required to develop and maintain a large volume and wide selection of
inventory, provide a full line of product offerings, implement advanced
management information systems and service national and regional accounts. We
believe that the five largest heavy duty vehicle parts distributors currently
account for less than 10% of all revenues generated in the heavy duty vehicle
parts and repair industry.

Competitive Strengths

We benefit from the following competitive strengths:

Ability to successfully execute our acquisition strategy. Since the
combination of City Truck and Stone in June 1998, we have successfully
identified, acquired and integrated 13 companies with 138 locations, forming
the largest distributor of heavy duty vehicle parts in the United States based
on both sales in the region and number of branch locations. The completed
acquisitions have permitted us to eliminate duplicative costs and reduce
overhead, expand product offerings and integrate regional sales activities.

Proven ability to grow revenue and profits. On a combined basis, we and our
predecessors have experienced strong same location sales growth averaging
approximately 4.4% annually over the past four years and approximately 6.1%
annually over the past two years. We have a strong record of successfully
opening or acquiring 47 branch locations since 1993. These locations generated
$101.0 million of 1998 sales.

Purchasing leverage. We are a leading customer of virtually all major heavy
duty vehicle replacement parts manufacturers. As a result of our purchasing
volume, we believe that we purchase parts at a discount to industry averages.
We are achieving cost savings by standardizing purchase prices at the lowest
cost among the acquired companies.

Established customer relationships. By emphasizing superior customer service,
we have developed long-standing relationships with many of our customers. We
are the leading distributor of heavy duty vehicle parts to local, regional and
national fleet operators such as United Parcel Service of America, Inc.,
Consolidated Freightways Corporation, Con-Way Transportation Services and
Penske Leasing, Inc. Our fleet customers depend on us for the timely
availability of high quality heavy duty parts. As evidence of the strength of
our customer relationships, we have served our top 10 customers for an average
of 14 years.

Superior inventory availability. Because of the significant costs associated
with vehicle downtime, we believe that the availability of parts on a timely
basis is the key component of quality service. We maintain a broad selection of
inventory with over 20,000 discrete part numbers. In order to achieve high fill
rates, we actively manage and track our inventory on a real-time basis through

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advanced information systems. We believe that we are more likely than our
competitors to have parts in stock when requested by our customers.

Outstanding customer service. We believe that we have a leading reputation
for providing high quality service based on more than 40 years of operations.
We are committed to attracting new customers and retaining existing customers
by:

. offering numerous branch locations conveniently located near our major
customers;

. providing a knowledgeable and responsive sales staff;

. ensuring timely delivery of products to our customers; and

. providing a hassle-free warranty policy for all of the products we sell.

Experienced management team. Our operating management has an average of 24
years of experience in the heavy duty vehicle parts and repair industry. Our
management and sales staff have extensive knowledge of our markets and long-
standing relationships with a broad range of customers and suppliers. We
developed our management team by retaining key operating managers from our
acquired companies and by recruiting our senior executives from outside the
heavy duty vehicle parts industry. Management owns approximately 19% of
Holdings' outstanding equity.

The negative factors relating to our competitive position in the heavy duty
vehicle aftermarket parts industry include:

. the industry is highly fragmented but is experiencing consolidation.
Current and potential competitors may have financial, personnel and other
resources substantially greater than ours to finance acquisition and
development opportunities;

. the industry consolidation may result in our competitors having lower
overhead cost structures which may enable them to provide their parts and
services at lower rates than us;

. the industry is highly competitive based primarily on service,
availability and quality of parts, geographic proximity and price;

. some owners of leased fleets may have sufficient leverage to purchase
replacement parts directly from component manufacturers or to negotiate
higher volume discounts from us.

Business Strategy

Our strategic objective is to further grow our sales and profits by
capitalizing on the continued growth and consolidation opportunities in the
heavy duty vehicle parts and repair industry. Our business strategy is to:

Become the largest national distributor of heavy duty vehicle parts. We
intend to build a nationwide system of branch locations through acquisitions as
well as the opening of new stores. As our customer base continues to
consolidate, we believe that it is increasingly important to establish a

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national presence to serve our customers effectively. Smaller independent
distributors may be unable to adequately supply larger fleets because they lack
a broad network of branch locations to satisfy customer expectations for rapid
delivery times, availability of a broad selection of parts, consistent pricing
and a uniform warranty policy.

Further reduce cost of products sold. We expect to further reduce our cost of
products sold by:

. passing on our favorable vendor terms to acquired companies;

. negotiating more favorable pricing and terms from our suppliers as our
total volume of purchases increases through acquisitions and internal
growth; and

. sourcing remanufactured components from our facilities and thereby
reducing purchases from outside remanufacturers.

Develop distribution and operating efficiencies. We believe that we will be
able to achieve distribution and operating efficiencies as we continue to add
locations, including:

. improved operating efficiency through regional management of individual
branch locations and the closing of overlapping branch locations;

. improved inventory management and enhanced customer service through the
integration of newly acquired businesses into our information and
logistics systems; and

. reduced overhead costs by consolidating administrative functions such as
marketing, insurance, employee benefits, accounting and risk management.

Achieve benefits from combining complementary operations. We believe that we
can obtain significant synergies from combining the operations of recently
acquired businesses and future acquisitions, including:

. sharing customer bases and broadening product offerings including cross-
selling of parts not previously offered at many of our locations;

. enhancing the efficiency of our remanufacturing operations by increasing
capacity utilization and consolidating overlapping facilities; and

. sharing "best practices" and operational expertise throughout our
company.

We expect our completed and pending acquisitions to generate a number of these
benefits. For example, the acquisitions of Truck & Trailer Parts and Vantage
Parts allow us to offer a broad selection of trailer parts throughout our
system. In addition, the acquisition of Active Gear provides additional
remanufacturing expertise and the opportunity to take advantage of facility
consolidation opportunities in the Pacific Northwest.

Expand relationships with national and regional fleet operators. We believe
there are significant opportunities to expand our sales to national and
regional fleet operators who are increasingly seeking to outsource their parts
inventory management and service work to integrated single-source providers.
With our broad network of branch locations we believe we are one of the only
distributors capable of effectively serving large national and regional fleets
operating in the southeastern, western and New England regions of the United
States.

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Operations and Services

Our 173 branch locations, which consist primarily of warehouse and service
space with a small retail selling space, offer well-known national brand name
and private label heavy duty vehicle replacement parts. If we do not have a
specific part in stock at a particular location, our sales employee can utilize
our information system at many of our locations to attempt to locate the
requested product from another location. Our information system allows the
sales employee to record the sale, reserve the part and request delivery. As a
result of our inventory management programs, we believe we provide broad
product availability on a timely basis which enhances customer satisfaction and
loyalty.

We also provide commercial vehicle parts installation and repair services in
several locations. We employ mechanics and other technicians who repair
vehicles using parts maintained in inventory. In addition, at 117 of our
facilities we offer machine shop services to rebuild and repair damaged or used
heavy duty vehicle parts for our customers, including some or all of: axles,
transmissions, power steering and hydraulic and driveline components. We also
operate 30 brake shoe remanufacturing facilities where approximately 160,000
brake shoes are remanufactured monthly. In addition, we remanufacture
drivelines, hydraulic systems, transmissions and rear axles. We resell these
parts, remanufactured to meet original specifications or specifications
acceptable to the customer, at a lower price than new parts.

Products

We distribute replacement parts for substantially all heavy duty vehicle
makes and models in service in the United States, including imported vehicles.
Our extensive product line includes a wide selection of parts for braking,
steering and suspension systems, transmissions, drivelines, axles, wheels and
rims, hydraulic systems and engine components. The useful lives of parts range
from those of high-mortality items such as brake shoes and drums, clutches,
bearings, belts and hoses, which are generally replaced frequently, to those of
transmissions, engines and drivelines, which generally have significantly
longer useful lives. In addition to replacement parts, we distribute ancillary
supply items such as oil, antifreeze, transmission, brake and power steering
fluids, engine additives, protectants and waxes. We believe approximately 35%
of our parts sales are attributable to the regular preventative maintenance of
heavy duty vehicles as opposed to "as needed" repairs. We inventory over 150
component brands. We also offer remanufactured components, including
remanufactured brake shoes under our own brand, which provide customers with a
timely and reliable source of high quality parts. We offer customers a hassle-
free, uniform warranty policy across our extensive network of locations. In
addition, we honor original equipment manufacturers' warranties.

Customers

We believe that our commitment to high quality customer service, consistent
availability of parts and hassle-free warranty policy are the key elements to
maintaining and continuing to build our diverse base of over 25,000 customers.
Generally, our customers are located within 25 miles of a branch location. We
service a large variety of local and regional government entities and
businesses. Our customers include:

. the local operations of companies with national and regional fleets, such
as Waste Management, Inc., Browning-Ferris Industries, Inc., Dole Food,
Inc., and Tyson Foods, Inc.;

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. companies with common carrier and rental fleets, including United Parcel
Service of America, Inc. and Consolidated Freightways Corporation; and

. government entities and utilities, including the North Carolina
Department of Transportation and Alabama Power.

We also distribute parts to independent repair shops, heavy duty vehicle
dealerships authorized by original equipment manufacturers and other heavy duty
vehicle owners and operators. No single customer accounted for more than 3% of
our pro forma sales in 1998, and our top ten customers accounted for
approximately 9% of our 1998 pro forma sales.

Suppliers

We purchase heavy duty vehicle parts from over 150 component manufacturers.
Our five largest principal parts suppliers, Meritor/Euclid, Federal Mogul, Dana
Corporation, Webb Wheel Products, Inc. and Bendix Friction Materials Division
of AlliedSignal Inc., represented less than 25% of our purchases in 1998. We
frequently purchase comparable parts from multiple manufacturers to enable us
to offer a broader selection of products to our customers. To maximize
efficient distribution of our products, we strive to have suppliers deliver
shipments directly to each of our branch locations. When that arrangement is
not possible, we receive parts at our central warehouses and utilize our fleet
of delivery vehicles to distribute the parts to each of the branch locations.
We are not dependent on any one supplier and do not have a purchasing contract
with any suppliers.

We receive rebates on all parts we purchase directly from vendors and through
Heavy Duty America, our primary purchasing cooperative. Heavy Duty America, the
largest industry purchasing cooperative in the United States, obtains the
largest volume discounts relative to the other industry purchasing groups. We
believe that we will be able to obtain additional volume discounts from
component manufacturers on both parts purchased through Heavy Duty America and
those purchased directly from the component manufacturers. We believe this
purchasing advantage will improve as we add volume through internal growth and
acquisitions.

Sales and Marketing

We believe that our superior customer service and our consistent availability
and quality of parts are critical elements in the sales process. Based on these
factors, among others, we have been able to establish and maintain long-term
relationships with existing customers as well as expand our market share
through our sales and marketing efforts. Management constantly monitors sales
activity according to customer type, product line, product group and location
to identify trends and ensure that our market share is maintained or increased.
Management also frequently reviews sales by territory and continually revises
marketing strategies to maximize productivity and sales. We receive advertising
and marketing allowances from component manufacturers which are based on our
volume of purchases. In addition, we actively cooperate with our suppliers to
design and implement effective marketing programs to promote our products.

We employ 950 persons in sales and marketing functions. Our sales force is
two-tiered: "inside" salespeople are responsible for maintaining customer
relationships, receiving and soliciting individual over-the-counter orders at
branch locations and responding to service and other inquiries by customers,
while "outside" salespeople are primarily responsible for identifying new
customers and soliciting new business. Our sales personnel are highly
specialized with expertise in manufacturers' specifications and customers'
needs. We believe that our experienced sales force has enabled us to maintain
one of the largest customer bases in the heavy duty vehicle replacement parts
industry in the United States.

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Facilities and Vehicles

We own eight facilities located in Milford, Connecticut, South Windsor,
Connecticut, Fresno, California, Phoenix, Arizona, Las Vegas, Nevada, Atlanta,
Georgia, Corpus Christi, Texas and Klamath Falls, Oregon and lease 165
facilities throughout the United States. Leases for 24, 15, 20, 4 and 30
facilities expire in 1999, 2000, 2001, 2002 and 2003, respectively. The
remaining 72 leases expire on various dates through 2017. The average total
warehouse and service space is approximately 10,000 square feet per location,
which consists primarily of warehouse and service space, with a small retail
selling space. Our facilities are used for sales, services, warehousing and
administration.

The shaded areas of the United States map below reflect the states where we
have branch locations.

[MAP OF UNITED STATES APPEARS HERE]

---------------------
*Number denotes number of branch locations in each state.

**We also have one facility located in the United Kingdom.

Our corporate office is located in 7,000 square feet of office space in
Deerfield, Illinois. In addition, we lease 3,500 square feet of office space in
Portland, Oregon and we own the land on which the Gardena, California facility
is located and property in Huntington Park, California which we lease to an
unrelated third party.

We operate 815 delivery trucks and 12 tractor trailers. Approximately 95% of
our fleet is dedicated to delivery services. Our 30 drive-in service facilities
are comprised of approximately 241 service bays and, as of June 30, 1999 on a
pro forma basis, we employed 296 full-time mechanics at these service
facilities.

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Competition

We operate in a highly fragmented and competitive industry. Competition is
based primarily on service, availability and quality of parts, geographic
proximity and price. We compete with other heavy duty vehicle parts
distributors, dealerships authorized by the original equipment manufacturers,
independent repair shops and component manufacturers on a regional and local
level. The heavy duty vehicle parts and repair industry has experienced
consolidation, and we compete with other companies which may pursue a
consolidation strategy. In addition, the members of the National Auto Parts
Association comprise an affiliated network of locations that compete with us
primarily for over-the-counter parts sales. We also compete with dealerships
authorized by original equipment manufacturers, such as Freightliner
Corporation, Mack Trucks, Inc., Navistar International Corporation and Paccar
Inc. These dealerships sell replacement parts to customers who purchased
vehicles from their dealerships as well as to other heavy duty vehicle owners
and operators who purchase replacement parts in the aftermarket. We believe
that our market leadership, significant purchasing leverage, superior customer
service, parts availability and delivery capabilities provide us with a
competitive advantage over other companies in the heavy duty vehicle parts and
repair industry.

Government Regulations and Environmental Matters

We are subject to a number of environmental laws. We are also subject to
federal, state and local laws and regulations relating to workplace health and
safety. In particular, our operations are subject to environmental laws
governing waste disposal, air and water emissions, the handling of hazardous
substances, workplace exposure and other matters. Stringent environmental laws
govern the handling and disposal of chemicals and substances, such as solvents
and lubricants, commonly used in some of our service and remanufacturing
operations. In addition, some of our facilities operate, or have operated,
above-ground and underground storage tanks for fuels and other substances which
are subject to a variety of environmental laws. We conduct environmental
diligence in connection with our acquisition program and obtained indemnities
from sellers of the businesses we have acquired, which in some cases are
limited by time and dollar amounts. If we fail, or our predecessors failed, to
comply with environmental laws, we may be liable for administrative, civil or
criminal penalties assessed or asserted by government agencies or other
parties. We may not be fully indemnified with respect to the actions of our
predecessors. If we release the substances described above into the
environment, whether at facilities we operate or at facilities where we have
arranged for disposal of the substances, we may also be liable for cleaning up
contamination which results from the releases. Currently, we are not party to
any legal proceedings pursuant to applicable environmental laws and believe we
are in material compliance with all applicable environmental laws. We endeavor
to evaluate properties owned or leased by potential acquisition candidates to
assess environmental conditions at the properties before any acquisition.

Management Information Systems; Year 2000 Issue

Each of the acquired companies operates advanced management information
systems. We use these systems to purchase, monitor and allocate inventory on a
real-time basis throughout our branch system and central warehouses. The
systems enable us to effectively manage inventory costs and turnover rates. The
systems include computerized order entry, sales analysis, inventory status,
invoicing and payment. We employ systems to determine optimum branch location
inventory levels based on usage rates, production statistics, technological
advances and other factors. We intend to install a common management
information system among all acquired businesses supported by Karmak, Inc., the
leading designer of information systems specifically for the heavy duty vehicle
replacement parts industry. We believe that our management information systems
will be Year 2000

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compliant by September 30, 1999. For a more detailed discussion of our Year
2000 issue, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Issue."

Employees

As of June 30, 1999, on a pro forma basis, we employed 2,900 persons. Of
these employees, approximately 563 serve in management and administration
functions, 950 serve in sales and marketing functions, 725 serve in warehousing
functions and 662 serve in repair and service functions. To market heavy duty
vehicle parts effectively, salespeople must have significant expertise
regarding the various manufacturers and specifications of vehicle parts. We
believe we maintain a competitive advantage over other parts distributors due
to the high level of expertise of our sales force. None of our employees are
party to collective bargaining agreements, and we benefit from good employee
relations.

To maximize performance from certain of our employees, including branch
managers and the sales force, we have implemented incentive-based compensation
programs based on both sales growth and profitability. We believe that we will
be able to attract and retain employees based on our incentive-based
compensation programs, opportunities for career advancement and a strong
benefits program.

Recruiting, Training and Safety

We believe that recruiting and training high quality personnel is a major
component of a successful operation. We have implemented a number of training
programs and incentives to encourage the development of technical expertise by
our sales and service personnel, which enables them to advise customers when
vehicles need regular scheduled maintenance, recommend the appropriate products
and instruct customers on parts use and installation.

We seek to hire employees from universities, community colleges, vocational
schools, other educational institutions, competitors and other companies in the
trucking industry. In addition, we provide on-the-job training, attractive
benefits packages, steady employment and opportunities for advancement. We
currently have a variety of safety programs in place, including training with
respect to operation of certain equipment, such as fork-lifts, and a bonus
system based on an employee's or an employee team's safety record. We are in
the process of establishing "best practices" throughout our operations to
ensure that all employees comply with the safety standards established by us,
our insurance carriers and federal, state and local laws and regulations.

Risk Management and Insurance

The primary risks in our business are bodily injury, property damage and
injured workers' compensation. We maintain liability insurance for bodily
injury and third-party property damage and workers' compensation coverage that
is standard for the industry and that we consider sufficient to insure against
these risks. We self-insure certain risks and obtain stop loss and catastrophic
coverage from insurance companies.

Legal Proceedings

In the ordinary course of business we are involved in legal proceedings
relating to claims arising out of our operations. We do not believe that there
are any pending or threatened legal proceedings that are reasonably likely to
have a material adverse effect on us.

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MANAGEMENT

Executive Officers and Directors

The following sets forth information regarding our executive officers and
directors as of October 31, 1999:

[Download Table]

Name Age Position
---- --- --------

John J. Greisch......... 43 President, Chief Executive Officer and Director
Vice President, Chief Financial Officer and
John P. Miller.......... 41 Secretary
Anthony W. Cavalle...... 43 Vice President Operations
Gene L. Curtin.......... 51 Vice President and Chief Information Officer
Frederick J. Warren..... 60 Chairman of the Board of Directors
Robert Anderson......... 79 Director
W. Larry Clayton........ 51 Director
Richard R. Crowell...... 44 Director
Christopher A.
Laurence............... 32 Director
Gerald L. Parsky........ 57 Director
William S. Wade......... 52 Director

John J. Greisch, President, Chief Executive Officer and Director. Mr. Greisch
has served as our President, Chief Executive Officer and as a director since
joining us in June 1998. From May 1986 to December 1997, Mr. Greisch served in
various positions at The Interlake Corporation, a global industrial equipment
manufacturer with approximately $800 million in 1997 sales that was acquired by
GKN plc in early 1999. Most recently, Mr. Greisch served as President of the
Material Handling Group, Interlake's largest operating unit with approximately
$475 million in 1997 sales, and before that he served as Vice President of
Finance, Chief Financial Officer. Mr. Greisch is a Certified Public Accountant.

John P. Miller, Vice President, Chief Financial Officer and Secretary. Mr.
Miller has served as our Vice President, Chief Financial Officer and Secretary
since joining us in June 1998. From 1997 to June 1998, Mr. Miller served as
Chief Financial Officer of Peapod, Inc., an internet-based grocery shopping
service. From 1985 to 1997, Mr. Miller served in various positions at
Interlake. Mr. Miller last served as Controller for Interlake, and before that
he served as Vice President Finance for Interlake's Material Handling Group.
Mr. Miller is a Certified Public Accountant.

Anthony W. Cavalle, Vice President Operations. Mr. Cavalle has served as Vice
President Operations since joining us in October 1998. From 1997 to October
1998, Mr. Cavalle served as Executive Vice President Operations of Carstar, a
franchiser and consolidator of collision service centers with approximately
$250 million in 1998 sales. From 1981 to 1997, Mr. Cavalle served in various
positions at Chief Auto Parts, an auto parts retailer and distributor with
approximately $500 million in 1997 sales. Mr. Cavalle's most recent position at
Chief Auto Parts was as Vice President Commercial and International Business
and before that he served as Vice President Marketing.

Gene L. Curtin, Vice President and Chief Information Officer. Mr. Curtin has
served as Vice President and Chief Information Officer since joining us in
February 1999. From 1992 to

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January 1999, Mr. Curtin served as Vice President and Chief Information Officer
of Wickes, Inc., a distributor of building supplies for professional
contractors with approximately $910 million in 1998 sales.

Frederick J. Warren, Chairman of the Board of Directors. Mr. Warren has
served as a director since June 1998. Mr. Warren has been with Brentwood since
co-founding it in 1972 and is presently a general partner of Brentwood Buyout
Management Partners, L.P. and Brentwood Buyout Partners, L.P., a managing
member of Brentwood Private Equity, L.L.C. and Brentwood Private Equity
Management, L.L.C. Mr. Warren is also a director of PulsePoint Communications.

Robert Anderson, Director. Mr. Anderson has served as a director since
October 1999. Mr. Anderson has been associated with Rockwell International
Corporation since 1968, where he has been Chairman Emeritus since 1990 and
served previously as Chairman of the Executive Committee from 1988 to 1990 and
as Chairman of the Board and Chief Executive Officer from 1979 to 1988. Mr.
Anderson is a director of Aftermarket Technology Corp., Gulfstream Aerospace
Corporation, Motor Cargo Industries, Inc. and Optical Data Systems Company.

W. Larry Clayton, Regional General Manager and Director. Mr. Clayton has
served as a Regional General Manager and as a director since our inception in
June 1998. Mr. Clayton is the founder of City Truck, and served as President of
City Truck from its inception in 1975. Mr. Clayton is currently a member of the
HDA Marketing Committee.

Richard R. Crowell, Director. Mr. Crowell has served as a director since
October 1999. Mr. Crowell is President and a founding partner of Aurora Capital
Partners. Prior to forming Aurora Capital Partners in 1991, Mr. Crowell was
Managing Director of Rosecliff, Inc., the management company for Acadia
Partners L.P., since its inception in 1987. Mr. Crowell is a director of
Aftermarket Technology Corp.

Christopher A. Laurence, Director. Mr. Laurence has served as a director
since June 1998. Mr. Laurence joined Brentwood in 1991 and is presently a
managing member of Brentwood Private Equity, L.L.C. and Brentwood Private
Equity Management, L.L.C. Mr. Laurence is also a director of Aspen Marketing
Group, Inc., Silver Cinemas International, Inc. and World Point Logistics.

Gerald L. Parsky, Director. Mr. Parsky has served as a director since October
1999. Mr. Parsky is the Chairman and a founding partner of Aurora Capital
Partners. Prior to forming Aurora Capital Partners in 1991, Mr. Parsky was a
senior partner and a member of the Executive and Management Committees of the
law firm of Gibson, Dunn & Crutcher LLP. Mr. Parsky is a director of
Aftermarket Technology Corp.

William S. Wade, Director. Mr. Wade has served as a director since October
1999. Prior to joining the board, Mr. Wade served as the Chief Executive
Officer of QDSP since its inception in 1998. From 1997 to 1998, he served as
Senior Vice President of Stant Corporation, and from 1994 to 1997, he served as
the Chief Executive Officer of Americas of F.A.G. Bearings.

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Executive Compensation

The following table sets forth information with respect to the compensation
we paid for services rendered during the year ended December 31, 1998 to our
Chief Executive Officer and to each of our three other most highly compensated
executive officers.

Summary Compensation Table

[Download Table]

Long Term
Annual Compensation
Compensation Awards
------------------ ----------------
Salary Restricted Stock
Name and Principal Position ($) Bonus ($) Award(s) ($)
--------------------------- -------- --------- ----------------

John J. Greisch (a)....................... $166,147 $82,106 --
President and Chief Executive Officer
John P. Miller (b)........................ $ 86,841 $69,255 $99,761
Vice President, Chief Financial Officer
and Secretary
Anthony W. Cavalle (c).................... $ 50,377 $16,285 --
Vice President Operations
Gene L. Curtin (d)........................ -- -- --
Vice President and Chief Information
Officer

--------
(a) Mr. Greisch became our President and Chief Executive Officer on June 1,
1998. His annualized salary from January 1, 1998 would have been $275,000.

(b) Mr. Miller became our Vice President, Chief Financial Officer and Secretary
on June 29, 1998. His annualized salary from January 1, 1998 would have
been $165,000. Mr. Miller's restricted stock awards represent the
difference between the purchase price and the fair market value of shares
of Holdings' preferred stock Mr. Miller acquired in July 1998. For a
summary of the terms of the purchase, see "Material Relationships and
Transactions."

(c) Mr. Cavalle became our Vice President Operations on October 6, 1998. His
annualized salary from January 1, 1998 would have been $175,000.

(d) Mr. Curtin became our Vice President and Chief Information Officer on
February 1, 1999 at an annual salary of $170,000.

Stock Options

On February 1, 1999, Holdings granted Mr. Curtin options to purchase 750
shares of Holdings common stock with an exercise price of $170 per share,
expiring on January 31, 2009, and vesting over eight years from the date of
grant. Vesting of the options may accelerate.

Compensation of Directors

The members of our board of directors do not receive any compensation for
their services as directors. They do receive reimbursement for travel and other
expenses incurred in their capacity as directors.

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PRINCIPAL STOCKHOLDERS

We are a wholly-owned subsidiary of our parent company, Holdings, which has
guaranteed the notes. Holdings has five classes of voting securities, common
stock and preferred stock designated as voting series A preferred stock, voting
series B preferred stock, series C special voting preferred stock and series D
special voting preferred stock. The common stock, series A preferred stock and
series B preferred stock vote together as a single class. Each of the series C
special voting preferred stock and series D special voting preferred stock vote
as separate classes and entitle each of Aurora and Brentwood, respectively, to
elect three directors, provided that Aurora and Brentwood maintain specified
ownership percentages of Holdings' common stock. The following table sets
forth, as of September 30, 1999 the ownership of Holdings' common stock and the
ownership of its voting preferred stock by each stockholder who is known by us
to own beneficially more than five percent of the outstanding common stock or
voting preferred stock, respectively, by each director, by each executive
officer listed in the table below, and by all directors and officers as a
group.

[Enlarge/Download Table]

Series A Series B Series C Series D
Preferred Preferred Preferred Preferred
Common Stock Stock Stock Stock Stock
Amount and Amount and Amount and Amount and Amount and
Nature of Percent Nature of Percent Nature of Percent Nature of Percent Nature of Percent Percent of
Beneficial of Beneficial of Beneficial of Beneficial of Beneficial of all Voting
Name and Address Ownership Class Ownership Class Ownership Class Ownership Class Ownership Class Securities
---------------- ------------ ------- ---------- ------- ---------- ------- ---------- ------- ---------- ------- ----------

Aurora(1)....... 170,061 43.2% -- -- 741,237 95.0% 1 100% -- -- 44.3%

Brentwood(2).... 143,771 36.5% 626,640 69.1% 17,506 2.2% -- -- 1 100.0% 37.5%

Frederick
Warren(2)(3)... -- -- -- -- -- -- -- -- -- -- --

Christopher
Laurence(2)(3).. -- -- -- -- -- -- -- -- -- -- --

Gerard
Parsky(1)(4)... -- -- -- -- -- -- -- -- -- -- --

Richard
Crowell(1)(4).. -- -- -- -- -- -- -- -- -- -- --

Robert
Anderson(1).... 236 * -- -- 884 0.1% -- -- -- -- *

William S.
Wade(1)........ 3,057 * -- -- 13,324 1.7% -- -- -- -- *

John J.
Greisch(5)..... 8,602 2.2% 6,983 * -- -- -- -- -- -- *

John P.
Miller(5)...... 1,979 * 998 * -- -- -- -- -- -- *

Anthony W.
Cavalle(5)..... 1,479 * 998 * -- -- -- -- -- -- *

W. Larry
Clayton(6)..... 8,600 2.2% 37,486 4.3% -- -- -- -- -- -- 2.2%
All directors
and officers as
a group (ten
persons)........ 23,953 6.1% 46,465 5.3% 14,208 1.8% -- -- -- -- 4.1%

------------------
* Less than one percent.
(1) The address for Aurora and Messrs. Parsky, Crowell, Anderson and Wade is
c/o Aurora Capital Group, 10877 Wilshire Boulevard, Suite 2100, Los
Angeles, California 90024. Aurora Equity Partners II L.P. is the owner of
record of 147,868 shares of common stock and 644,504 shares of preferred
stock, Aurora Overseas Equity Partners II L.P. is the owner of record of
1,999 shares of common stock and 8,711 shares of preferred stock and
Quality Distribution Equity Partners L.P. is the owner of record of 20,195
shares of common stock and 88,022 shares of preferred stock, indicated as
owned by Aurora.
(2) The address for Brentwood and Messrs. Warren and Laurence, is c/o Brentwood
Associates, 11150 Santa Monica Boulevard, Suite 1200, Los Angeles,
California 90025. BABF City Corp., wholly owned by Brentwood Associates
Buyout Fund II, L.P., is the owner of record of 57,227 shares of common
stock and 249,428 shares of preferred stock and HDA Partners I, L.P., of
which Brentwood is the general partner, is the owner of record of 86,544
shares of common stock and 377,212 shares of preferred stock, indicated as
owned by Brentwood.
(3) Messrs. Warren and Laurence are managing members of the general partner of
Brentwood Associates Buyout Fund II, L.P., and in that capacity share
voting and dispositive power with respect to the shares owned by Brentwood
Associates Buyout Fund II, L.P. and may be deemed to be beneficial owners
of those shares but disclaim beneficial ownership of those shares.
(4) Messrs. Parsky and Crowell are managing members of the general partner of
Aurora Capital Group, and in that capacity share voting and dispositive
power with respect to the shares owned by Aurora Equity Partners II L.P.,
Aurora Overseas Equity Partners II L.P. and Quality Distribution Equity
Partners L.P. and may be deemed to be beneficial owners of those shares but
disclaim beneficial ownership of those shares.
(5) The address for Messrs. Greisch, Miller and Cavalle is c/o HDA Parts
System, Inc., 520 Lake Cook Road, Deerfield, Illinois 60015.
(6) The address for Mr. Clayton is c/o City Truck and Trailer Parts, 2912 3rd
Avenue North, Birmingham, Alabama 35202.

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MATERIAL RELATIONSHIPS AND TRANSACTIONS

Relationship with Brentwood and Aurora

Pursuant to a management services agreement, dated as of September 30, 1999,
among Holdings, Brentwood Private Equity Management, L.L.C., an affiliate of
Brentwood, and Aurora Management Partners LLC, an affiliate of Aurora,
Brentwood Private Equity Management and Aurora Management Partners have agreed
to provide us with financial consulting services, including consultation and
advice in such fields as financial services, accounting, general business
management, acquisitions, dispositions, banking and other matters.

We may terminate the management services agreement for justifiable cause with
respect to Brentwood Private Equity Management by written notice to it,
authorized by a majority of the directors other than those appointed by
Brentwood Private Equity Management. We may terminate the management services
agreement for justifiable cause with respect to Aurora Management Partners by
written notice to it, authorized by a majority of the directors other than
those appointed by Aurora Management Partners. Justifiable cause means
commission of any of the following acts by Brentwood Private Equity Management
or Aurora Management Partners, as the case may be:

(a) misappropriation of our funds or property;

(b) gross neglect or willful misconduct in the fulfillment of its
obligations under the management services agreement; or

Unless earlier terminated for justifiable cause, the management services
agreement will automatically terminate:

(a) with respect to Brentwood Private Equity Management, on the date that
Brentwood no longer retains the voting and dispositive power with
respect to at least 45% of the total number of shares of our common
stock that it held immediately following the consummation of the
transactions contemplated by the QDSP merger agreement; and

(b) with respect to Aurora Management Partners on the date that Aurora no
longer retains the voting and dispositive power with respect to at
least 45% of the total number of shares of our common stock that it
held immediately following the consummation of the transactions
contemplated by the QDSP merger agreement.

Pursuant to the management services agreement, each of Brentwood Private
Equity Management and Aurora Management Partners are entitled to receive a fee
of $375,000 per year, payable semi-annually in advance. In addition, we will:

. pay to each of Brentwood Private Equity Management and Aurora Management
Partners a transaction fee for merger and acquisition services equal to
0.75% of the aggregate transaction consideration, not to exceed $100,000;

. promptly reimburse each of Brentwood Private Equity Management and Aurora
Management Partners for all reasonable out-of-pocket costs and expenses
incurred in connection with their investment in us and the performance of
their respective obligations under the management services agreement.

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In connection with the acquisitions, we have paid Brentwood Private Equity
Management and Aurora Management Partners fees amounting to $4.8 million and
$1.0 million, respectively. We believe the terms of the management services
agreement are as fair to us as those that could have been obtained from arms-
length negotiations with unrelated parties.

We financed a portion of our start-up costs, including the recapitalization
of City Truck, the Stone acquisition and the financing of City Truck and
Stone's then existing debt, with funds provided by Brentwood, as follows:

. Brentwood purchased $6.0 million in interim securities;

. Brentwood and other investors purchased $10.2 million of our equity
securities; and

. Brentwood purchased City Truck's outstanding common stock for $20 million.

We used a portion of the net proceeds from the July 31, 1998 issuance of the
private notes to redeem the $6.0 million of interim securities purchased by
Brentwood. In addition, in May 1999, Brentwood purchased another $15.0 million
of Holdings' equity securities. In connection with our merger with QDSP,
Brentwood and Aurora also made cash equity contributions of $3.1 million and
$36.9 million, respectively, to Holdings.

Stockholders' Agreement

On September 30, 1999, Holdings and each of Holdings' stockholders at that
time entered into a stockholders' agreement which amends and restates the
September 30, 1998 stockholders agreement and restricts the transfer of shares
of common stock and preferred stock held by the stockholders. The stockholders'
agreement also entitles the stockholders to rights regarding the transfer of
their shares and the election of directors.

The stockholders' agreement provides a "right of first refusal" to Holdings
and each of the stockholders owning the same class of securities being offered
for sale. The stockholders' agreement also provides stockholders with "tag-
along rights." If any stockholder then owning 10% or more of the outstanding
shares of any class or series of Holdings' common stock proposes to transfer
any shares, each of the other stockholders may require the proposed purchaser
to purchase a pro rata portion of its shares, and the 10% selling stockholder
would have to make a corresponding reduction in the number of its shares to be
purchased. In addition, the stockholders' agreement provides Brentwood and
Aurora with "drag-along rights." If Brentwood and Aurora desire to sell all of
their shares to an unaffiliated third-party who has offered to acquire all of
Holdings' outstanding shares, then Brentwood and Aurora may require each of the
other stockholders to sell all of their shares in the same transaction and upon
the same terms and conditions.

The right of first refusal, tag-along rights and drag-along rights terminate on
the earlier to occur of:

(1) the closing of an underwritten public offering of Holdings' common
stock, following which Holdings' common stock is listed on a national
securities exchange or the Nasdaq Stock Market, provided that the
proceeds of the offering are not less than $50,000,000; or

(2) any transfer of Holdings' equity securities in connection with a
merger, consolidation, sale of assets or sale or exchange of Holdings'
stock representing more than 50% of the voting power in terms of the
election of Holdings' directors.

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The stockholders' agreement provides the parties with rights to have their
shares registered for sale under the Securities Act.

The stockholders' agreement also provides that Larry Clayton, or in the event
of his death or incapacity to perform his duties as director, Delton Clayton,
shall be entitled to be a director as long as Larry Clayton and his affiliates
own at least 45% of the 11,445 shares of common stock owned by Larry Clayton
and his affiliates as of September 30, 1998. As long as the Clayton director is
entitled to be a member of the board and Holdings' series C preferred stock
remains outstanding, Aurora shall be entitled to nominate one director who is
not an employee of Aurora or its affiliates.

Stock Purchase Agreements

Several of our executive officers, senior managers and a director acquired
equity interests in Holdings consisting of common stock and series A preferred
stock pursuant to the stock purchase agreements summarized below.

John J. Greisch, President and Chief Executive Officer. Mr. Greisch purchased
6,602 shares of our common stock for $1.00 per share and 6,983.976 shares of
our series B preferred stock for $100 per share pursuant to his stock purchase
agreement, dated as of July 1, 1998. In connection with a stock contribution
agreement, dated as of August 27, 1998 between Holdings and the stockholders
listed therein, Mr. Greisch exchanged his shares of our common stock and series
B preferred stock for an equal number of shares of common stock and series A
preferred stock of Holdings.

Of the common stock purchased by Mr. Greisch, 5,000 of the shares vest over
eight years so long as he is employed by us, with one-half of the shares
eligible for accelerated vesting if we meet specified EBITDA targets. We were
deemed to meet the EBITDA targets for 1998 regardless of our actual results.

If Mr. Greisch's employment is terminated for any reason, a portion of the
unvested common shares will become immediately vested, and additional shares
may also vest if we meet specified EBITDA targets. Holdings may purchase any or
all of the remaining unvested shares for $1.00 per share.

Mr. Greisch also purchased 2,000 shares of Holdings' common stock for $170
per share pursuant to his stock purchase agreement dated as of March 5, 1999.
These shares vest over four years so long as he is employed by us. Of the
$340,000 purchase price for the shares, Mr. Greisch paid $3,400 in cash and
signed a promissory note for the remaining $336,600. The promissory note
matures on March 4, 2004, bears interest at 5.3% per year and requires payments
from time to time. The note is collateralized by these shares.

If Mr. Greisch's employment is terminated for any reason, a portion of the
unvested shares will become immediately vested. Holdings may purchase any or
all of the remaining unvested shares for $170 per share. If Mr. Greisch's
employment is terminated prior to an initial public offering of common stock,
Holdings may purchase any and all of the vested common shares at fair market
value.

If we are acquired by a third party through an asset purchase, merger or sale
of more than 50% of our outstanding equity, all of the common shares will vest
immediately before the acquisition.

John P. Miller, Vice President, Chief Financial Officer and Secretary. Mr.
Miller purchased 1,729 shares of our common stock for $1.00 per share and
997.710 shares of our series B preferred

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stock for $.01 per share pursuant to his stock purchase agreement, dated as of
July 10, 1998. In connection with the stock contribution agreement, Mr. Miller
exchanged his shares of our common stock and series B preferred stock for an
equal number of shares of common stock and series A preferred stock of
Holdings.

Of the common stock purchased by Mr. Miller, 1,500 of the shares are subject
to the same vesting conditions as Mr. Greisch's. The remaining 229 shares of
common stock and the preferred stock purchased by Mr. Miller vest over three
years.

If Mr. Miller's employment is terminated for any reason, his shares are
subject to the same vesting conditions as Mr. Greisch's, except that if Mr.
Miller's employment is terminated before an initial public offering of common
stock, Holdings may purchase any and all of the vested common shares at fair
market value.

If Mr. Miller is involuntarily terminated, his 229 additional shares become
immediately vested. If Mr. Miller voluntarily terminates his employment before
full vesting of the these additional shares, Holdings may purchase, and Mr.
Miller may require Holdings to purchase, any or all of his remaining unvested
shares at the purchase price for the shares.

Mr. Miller also purchased 250 shares of Holdings' common stock for $170 per
share pursuant to his stock purchase agreement dated as of March 5, 1999. Of
the $42,500 purchase price for the shares, Mr. Miller paid $425 in cash and
signed a promissory note for the remaining $42,075. The promissory note matures
on March 4, 2004, bears interest at 5.3% per annum and requires payments from
time to time. The note is collateralized by these shares. These shares are
otherwise subject to the same terms and conditions as Mr. Greisch's pledged
shares.

If we are acquired by a third party through an asset purchase, merger or sale
of more than 50% of our outstanding equity, Mr. Miller's common shares are
subject to the same conditions as Mr. Greisch's.

Anthony W. Cavalle, Vice President Operations. Mr. Cavalle purchased 1,229
shares of Holdings' common stock for $1.00 per share and 997.711 shares of
Holdings' series A preferred stock for $100 per share pursuant to his stock
purchase agreement, dated as of October 19, 1998.

Of the common stock purchased by Mr. Cavalle, 1,000 of the shares vest over
eight years, with one-half of the shares eligible for accelerated vesting if we
meet specified EBITDA targets. If we do not meet our EBITDA target in a given
year but exceed our target in the immediately following year, a portion of the
shares scheduled to vest in the prior year may qualify for accelerated vesting
in the subsequent year. All unvested shares will immediately vest upon Mr.
Cavalle's death or total physical disability.

If Mr. Cavalle's employment is involuntarily terminated before December 31,
2002, Holdings may purchase 1,000 of his common shares, whether vested or
unvested, for $1.00 per share and he will be released from his covenant not to
compete. If Mr. Cavalle's employment is terminated for any other reason, he has
the option to (1) allow Holdings to purchase 1,000 of his common shares,
whether vested or unvested, for $1.00 per share and be released from his
covenant not to compete or (2) keep his vested shares and not be subject to the
covenant not to compete, but Holdings may purchase the unvested shares for
$1.00 per share.

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Mr. Cavalle also purchased 250 shares of Holdings' common stock for $170 per
share pursuant to his stock purchase agreement dated as of March 5, 1999. Of
the $42,500 purchase price for the shares, Mr. Cavalle paid $425 in cash and
signed a promissory note for the remaining $42,075. The promissory note matures
on March 4, 2004, bears interest at 5.3% per annum and requires payments from
time to time. The note is collateralized by these shares. These shares are
otherwise subject to the same terms and conditions as Mr. Greisch's pledged
shares.

If we are acquired by a third party through an asset purchase, merger or sale
of more than 50% of our outstanding equity, Mr. Cavalle's common shares will be
subject to substantially the same conditions as Messrs. Greisch and Miller,
except that Holdings may purchase for $1.00 per share all shares eligible for
accelerated vesting which did not vest in the year before the year the
acquisition closed.

Gene L. Curtin, Vice President and Chief Information Officer. Mr. Curtin
purchased 174 shares of Holdings' common stock for $170 per share and 758.261
shares of Holdings Series A preferred stock for $100 per share pursuant to his
stock purchase agreement dated as of February 1, 1999. None of these shares are
subject to vesting conditions.

Martin R. Reid, Director. Mr. Reid purchased 858 shares of Holdings' common
stock for $1.00 per share and 1995.422 shares of Holdings' series A preferred
stock for $100 per share pursuant to his stock purchase agreement, dated as of
September 30, 1998.

Of the common stock purchased by Mr. Reid, 400 of the shares vest over five
years so long as Mr. Reid serves continuously as a director of Holdings. If Mr.
Reid's directorship is terminated for any reason, a portion of the vested
common shares will become immediately vested. Holdings may purchase any or all
of the remaining unvested common shares for $1.00 per share.

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DESCRIPTION OF CREDIT FACILITY

On September 30, 1999, we entered into a $225.0 million credit agreement with
the several lenders parties thereto, First Union National Bank, as
documentation agent, Credit Suisse First Boston, as syndication agent, Chase
Securities Inc. as advisor, lead arranger and book manager and The Chase
Manhattan Bank, as administrative agent, which replaced our previous $85.0
million revolving credit facility. The following is a summary description of
the principal terms of the credit facility and the related loan documents. For
a complete description, please refer to the credit facility which we have filed
as an exhibit to the registration statement. Our obligations under the credit
facility will constitute senior debt and designated senior debt with respect to
the notes.

Structure; Maturity. The lenders have committed, subject to compliance with
conditions customary for facilities of this nature, to provide us with a five-
year $75.0 million term loan and a five-year $150.0 million revolving credit
facility. We used the term loan to refinance our and QDSP's existing bank
indebtedness and paid fees and expenses related to the QDSP merger. We intend
to use the revolving credit facility for general corporate purposes, including
acquisitions.

The term loan matures in consecutive quarterly installments of $250,000
beginning on December 31, 1999 with a final payment of $70,250,000 due on
September 30, 2004. The revolving credit facility matures on September 30,
2004. Loans and letters of credit under the revolving credit facility will be
available at any time during its five-year term subject to the fulfillment of
customary conditions precedent, including the absence of specified events of
default under the revolving credit facility. Mandatory commitment reductions
will result from 100% of the net proceeds of specified asset sales not
reinvested in the business, 100% of net proceeds of capital stock or debt
issued or incurred, and, beginning on December 31, 1999, 100% of "excess cash
flow," as defined in the credit facility. Payments in respect of commitment
reductions are first applied to the prepayment of the term loan and second to
reduce permanently the availability under the credit facility.

Security; Guaranty. The credit facility is secured by a perfected first
priority security interest in substantially all of our and our subsidiaries'
assets including:

. all accounts receivable, inventory, intangibles and other property; and

. 100% of our and any domestic subsidiaries' capital stock and 65% of any
foreign subsidiaries' capital stock.

Any future domestic subsidiary will be required to enter into a guaranty of
the credit facility.

Interest. Borrowings under the credit facility will bear interest at a rate
per annum equal, at our option, to:

(1)the eurodollar rate, as defined in the credit facility; or

(2)the greatest of:

(a) the prime rate of interest publicly announced by The Chase
Manhattan Bank as its reference rate; and

(b) the base CD rate, as defined in the credit facility, plus 1%; and

(c) the federal funds effective rate, as defined in the revolving
credit facility, in effect from time to time plus 0.50%,

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in each case, plus an applicable margin, ranging from 2.00% to 3.75% in the
case the eurodollar rate and 1.00% to 2.75% in the case of the other rates. The
applicable margins will be subject to fluctuations pursuant to a grid based on
our consolidated leverage ratio, as defined in the credit facility. The
effective interest rate on our outstanding term loan and revolving credit
facility as of September 30, 1999 was approximately 9.2% per year.

Fees. We are required to pay, on a quarterly basis, a commitment fee on the
undrawn portion of the revolving credit facility generally at a rate equal to
0.50% per year. We are also obligated to pay:

. a letter of credit fee on the aggregate amount of outstanding letters of
credit;

. a fronting bank fee for the letter of credit issuing bank; and

. customary agent, arrangement and other similar fees.

Covenants. The credit facility contains covenants that, among other things,
restrict our and our subsidiaries' ability to dispose of assets, incur
additional debt, prepay other debt or amend debt instruments, pay dividends or
redeem stock, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, make capital expenditures, change the business
conducted by us or our subsidiaries or engage in transactions with affiliates
and otherwise restrict some of our corporate activities. In addition, we are
required to maintain specified financial ratios and satisfy specified financial
tests, including maximum leverage ratios and a minimum interest coverage ratio.

Events of Default. The credit facility contains events of default customary
for facilities of this nature, including:

. nonpayment of principal, interest or fees;

. breach of covenants, representations or warranties;

. cross-default to certain other debt;

. bankruptcy or insolvency;

. material judgments against us and our subsidiaries;

. invalidity of any guarantee or security interest;

. certain events under the Employee Retirement Income Security Act of 1974;
and

. a change in our control under the circumstances described in the
revolving credit facility.

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DESCRIPTION OF NOTES

You can find the definitions of terms used in this description under the
subheading "Definitions." In this description, the word "HDA" refers only to
HDA Parts System, Inc. and not to any of its subsidiaries.

HDA will issue the notes under an indenture among itself, the guarantors and
U.S. Trust Company, National Association, as trustee. The terms of the notes
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939.

The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes. We have filed copies of the indenture and the
registration rights agreement as exhibits to the registration statement which
includes this prospectus.

Brief Description of the Notes and the Guarantees

The Notes

These notes:

. are general, unsecured obligations of HDA;

. are subordinated in right of payment to all existing and future senior
debt of HDA;

. are senior or pari passu in right of payment to any future subordinated
indebtedness of HDA; and

. are unconditionally guaranteed by the guarantors.

The Guarantees

These notes are guaranteed by the following subsidiaries of HDA:

City Truck and Trailer Parts of Alabama, Inc.
City Truck and Trailer Parts of Alabama, L.L.C.
City Truck and Trailer Parts of Alabama of Tennessee, Inc.
City Friction, Inc.
Truck & Trailer Parts, Inc.
Truckparts, Inc.
Associated Brake Supply, Inc.
Associated Truck Center, Inc.
Onyx Distribution, Inc.
Associated Truck Parts of Nevada, Inc.
Freeway Truck Parts of Washington, Inc.
Tisco, Inc.
Tisco of Redding, Inc.
Active Gear, L.L.C.
Superior Truck & Auto Supply, Inc.
QDSP Holdings, Inc.
Quality Distribution Service Partners, Inc.
Automotive Sales Company, Inc.

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City Spring Works, Inc.
Fleetpride, Inc.
Holt Incorporated
SLM Power Group, Inc.
Truck City Parts, Inc.
Universal Joint Sales Company, Inc.
Wheatley Truck Parts, Inc.
CB Acquisition Sub, Inc.
New England Truck & Auto Service, Inc.
TBS, Incorporated
Four-T Sales & Service, Inc.
Stats Remanufacturing Center, Inc.
Power Export Distributing Company
Power Equipment International, Inc.
Parts Management Company
Parts Holding Company
Specialized Sales & Service, Inc.
Parts Distributing Company, Ltd.
Wheels and Brakes, Inc.
Specrite Brake Company

These notes are also guaranteed by HDA's parent, City Truck Holdings, Inc.

The guarantees of these notes:

. are general, unsecured obligations of each guarantor;

. are subordinated in right of payment to all existing and future senior
debt of each guarantor; and

. are senior or pari passu in right of payment to any future subordinated
indebtedness of each guarantor.

As of June 30, 1999, HDA and the guarantors had total senior debt of
approximately $103.1 million. As indicated above and as discussed in detail
below under the subheading "Subordination," payments on the notes and under the
guarantees will be subordinated to the payment of senior debt. The indenture
will permit us and the guarantors to incur additional senior debt.

As of the date of the prospectus, all of our subsidiaries are "Restricted
Subsidiaries." However, the indenture permits us to designate our subsidiaries
as "Unrestricted Subsidiaries." Unrestricted Subsidiaries will not be subject
to many of the restrictive covenants in the indenture. Unrestricted
Subsidiaries will not guarantee these notes.

Principal, Maturity and Interest

HDA will issue notes with a maximum aggregate principal amount of $100.0
million. HDA will issue notes in denominations of $1,000 and integral multiples
of $1,000. The notes will mature on August 1, 2005.

Interest on these notes will accrue at the rate of 12% per annum and will be
payable semi-annually in arrears on February 1 and August 1 of each year,
commencing on August 1, 1999. HDA

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will make each interest payment to the holders of record of these notes on the
immediately preceding January 15 and July 15.

Interest on these notes accrues from February 1, 1999. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.

Methods of Receiving Payments on the Notes

Principal of, premium, if any, and interest on the notes will be payable at
the office or agency of HDA maintained for that purpose within the City and
State of New York, unless HDA elects to make interest payments by check mailed
to the holders of notes at their address set forth in the register of holders.

Paying Agent and Registrar for the Notes

The trustee will initially act as paying agent and registrar. HDA may change
the paying agent or registrar without prior notice to the holders of the notes,
and HDA or any of its subsidiaries may act as paying agent or registrar.

Transfer and Exchange

A holder may transfer or exchange notes in accordance with the indenture. The
registrar and the trustee may require a holder, among other things, to furnish
appropriate endorsements and transfer documents and HDA may require a holder to
pay any taxes and fees required by law or permitted by the indenture. HDA is
not required to transfer or exchange any note selected for redemption. Also,
HDA is not required to transfer or exchange any note for a period of 15 days
before a selection of notes to be redeemed.

The registered holder of a note will be treated as the owner of it for all
purposes.

Subsidiary and Parent Guarantees

The guarantors will fully and unconditionally guarantee HDA's obligations
under these notes on a joint and several basis. Each subsidiary guarantee will
be subordinated to the prior payment in full of all senior debt of that
guarantor. The obligations of each guarantor under its subsidiary guarantee
will be limited as necessary to prevent that Subsidiary Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk Factors--
The notes are subject to review for fraudulent transfer considerations" for a
more detailed description of the fraudulent transfer considerations.

A guarantor may not sell or otherwise dispose of all or substantially all of
its assets, or consolidate with or merge with or into another Person, whether
or not that guarantor is the surviving Person, unless:

(1) immediately after giving effect to that transaction, no Default or Event
of Default exists;

(2) either:

(a) the Person acquiring the property in that sale or disposition or the
Person formed by or surviving that consolidation or merger assumes all the
obligations of that guarantor pursuant to a supplemental indenture
satisfactory to the trustee; or

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(b) the Net Proceeds of that sale or other disposition are applied in
accordance with the applicable provisions of the indenture; and

(2) immediately after giving effect to that transaction on a pro forma basis,
the consolidated resulting, surviving or transferee entity would immediately
thereafter be permitted to incur at least $1.00 of additional indebtedness
pursuant to the Debt Incurrence Ratio set forth in the first paragraph of the
covenant in the indenture under the caption "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock."

The subsidiary guarantee of a guarantor will be released:

(1) in connection with any sale or other disposition of all or substantially
all of the assets of that guarantor, including by way of merger or
consolidation, if HDA applies the Net Proceeds of that sale or other
disposition, in accordance with the applicable provisions of the indenture; or

(2) in connection with any sale of all of the capital stock of a guarantor,
if HDA applies the Net Proceeds of that sale in accordance with the applicable
provisions of the indenture; or

(3) if HDA designates any Restricted Subsidiary that is a guarantor as an
Unrestricted Subsidiary.

Subordination

The payment of principal, premium and interest, if any, on these notes will
be subordinated to the prior payment in full of all senior debt of HDA.

In the event of any distribution to creditors of the HDA, the holders of
senior debt will be entitled to receive payment in full of all obligations due
in respect of senior debt, including interest after the commencement of any
bankruptcy or insolvency proceeding at the rate specified in the applicable
senior debt, before the holders of notes will be entitled to receive any
payment with respect to the notes, except that holders of notes may receive and
retain Junior Securities and payments made from the trust described under "--
Legal Defeasance and Covenant Defeasance."

(1) in a liquidation or dissolution of HDA;

(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to HDA or its property;

(3) in an assignment for the benefit of creditors; or

(4) in any marshalling of HDA's assets and liabilities.

HDA also may not make any payment in respect of the notes, except in Junior
Securities or from the trust described under "--Legal Defeasance and Covenant
Defeasance", if:

(1) a payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or

(2) any other default occurs and is continuing on Designated Senior Debt that
permits holders of the Designated Senior Debt to accelerate its maturity and
the trustee receives a notice of that default (a "Payment Blockage Notice")
from HDA or the holders of any Designated Senior Debt.

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Payments on the notes may and shall be resumed:

(1) in the case of a payment default, upon the date on which that default is
cured or waived; and

(2) in case of a nonpayment default, the earlier of the date on which that
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
senior debt has been accelerated.

No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice.

No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless that default shall have been
cured or waived for a period of not less than 90 days.

As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of HDA, holders of these notes may
recover less ratably than creditors of HDA who are holders of senior debt. For
a description of the risk to you, see "Risk Factors--Your right to receive
payments on the notes is subordinated to all of our existing and future senior
debt and we may not have sufficient assets to fulfill our obligations to you."

Optional Redemption

Until August 1, 2001, HDA may redeem up to 35% of the aggregate principal
amount of the notes issued pursuant to the indenture with cash from the Net
Cash Proceeds of a public equity offering of common stock of HDA. The parent
may also make the redemption if the Net Cash Proceeds sufficient to make the
redemption are contributed to HDA by the parent as a Capital Contribution, at a
redemption price equal to 112% of principal together with accrued and unpaid
interest and liquidated damages, if any, to the redemption date, provided that:

(1) immediately following that redemption not less than 65% of the
aggregate principal amount of the notes issued pursuant to the indenture
remain outstanding; and

(2) the redemption must occur within 90 days of that public equity
offering.

Except pursuant to the preceding paragraph, the notes will not be redeemable
at HDA's option prior to August 1, 2002.

On or after August 1, 2002, HDA may redeem all or a part of these notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices set
forth below plus accrued and unpaid interest, if any, on these notes to the
applicable redemption date, if redeemed during the twelve-month period
beginning on August 1 of the years indicated below:

[Download Table]

Year Percentage
---- ----------

2002.......................................................... 106.000%
2003.......................................................... 103.000%
2004 and thereafter........................................... 100.000%

In the case of a partial redemption, the trustee shall select the notes or
portions of the notes for redemption on a pro rata basis or by lot. The notes
may be redeemed in part in multiples of $1,000 only.

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The notes will not have the benefit of any sinking fund.

Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the holder
of each note to be redeemed to that holder's last address as then shown upon
the registry books of the registrar. Any notice which relates to a note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion of that note and must state that on and after the date
of redemption, upon surrender of that note, a new note or notes in a principal
amount equal to the unredeemed portion of that note will be issued. On and
after the date of redemption, interest will cease to accrue on the notes or
portions of the notes called for redemption, unless HDA defaults in the payment
of the notes.

Repurchase at the Option of Holders

Change of Control

If a Change of Control occurs, each holder of notes will have the right to
require HDA to repurchase all or any part of that holder's notes pursuant to
the Change of Control Offer. In the Change of Control Offer, HDA will offer a
Change of Control Purchase Price in cash equal to 101% of the aggregate
principal amount of notes repurchased plus accrued and unpaid interest thereon
and liquidated damages, if any, to the date of purchase. Within 20 business
days following any Change of Control, HDA will mail a notice to each holder of
notes describing the transaction or transactions that constitute the Change of
Control and offering to repurchase notes on the Change of Control Purchase Date
specified in the notice, pursuant to the procedures required by the indenture
and described in the notice. HDA will comply with the requirements of Rule 14e-
1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent those laws and regulations are applicable in
connection with the repurchase of the notes as a result of a Change of Control.

On the Change of Control Purchase Date, HDA will, to the extent lawful:

(1) accept for payment all notes or portions of notes properly tendered
pursuant to the Change of Control Offer;

(2) deposit with the paying agent an amount equal to the Change of Control
Purchase Price in respect of all notes or portions of notes properly tendered;
and

(3) deliver or cause to be delivered to the trustee the notes so accepted
together with an officers' certificate stating the aggregate principal amount
of notes or portions of the notes being purchased by HDA.

The paying agent will promptly mail to each holder of notes properly tendered
the Change of Control Purchase Price for those notes, together with accrued and
unpaid interest thereon, and the trustee will promptly authenticate and mail,
or cause to be transferred by book entry, to each holder a new note equal in
principal amount to any unpurchased portion of the notes surrendered.

Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 20 business days following a Change of
Control, HDA will either repay in full and terminate all commitments under all
indebtedness under the credit agreement, offer to repay in full and terminate
all commitments under all indebtedness under the credit agreement and repay the
indebtedness owed to each lender which has accepted the offer in full, or
obtain the requisite consents under the credit agreement to permit the
repurchase of notes required by this covenant. HDA will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.

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The provisions described above that require HDA to make a Change of Control
Offer following a Change of Control will be applicable regardless of whether or
not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the holders of the notes to require that HDA repurchase
or redeem the notes in the event of a takeover, recapitalization or similar
transaction.

HDA's outstanding senior debt currently prohibits HDA from purchasing any
notes, and also provides that certain change of control events with respect to
HDA would constitute a default under the agreements governing the senior debt.
Any future credit agreements or other agreements relating to senior debt to
which HDA becomes a party may contain similar restrictions and provisions. If a
Change of Control occurs at a time when HDA is prohibited from purchasing
notes, HDA could seek the consent of its senior lenders to the purchase of
notes or could attempt to refinance the borrowings that contain that
prohibition. If HDA does not obtain that consent or repay those borrowings, HDA
will remain prohibited from purchasing notes. In that case, HDA's failure to
purchase tendered notes would constitute an event of default under the
indenture which would, in turn, constitute a default under that senior debt. In
those circumstances, the subordination provisions in the indenture would likely
restrict payments to the holders of notes.

HDA will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by HDA and purchases all
notes validly tendered and not withdrawn under the Change of Control Offer.

The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of HDA or parent, as the case may be. Although there is a limited
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law. Accordingly,
the ability of a holder of notes to require HDA to repurchase those notes as a
result of a sale, lease, transfer, conveyance or other disposition of less than
all of the assets of HDA or parent, as the case may be, to another Person or
group may be uncertain.

Asset Sales

HDA and the guarantors will not, and will not permit any of their respective
subsidiaries to, consummate an Asset Sale unless:

(1) the board of directors of HDA determines in good faith that HDA receives
consideration at the time of such Asset Sale at least equal to the fair market
value for such Asset Sale;

(2) no default or event of default shall have occurred and be continuing at
the time of, or would occur after giving effect, on a pro forma basis, to, such
Asset Sale; and

(3) at least 75% of the consideration therefor received by HDA or such
subsidiary is in the form of cash. For purposes of this provision, each of the
following shall be deemed to be cash:

(a) Purchase Money Indebtedness secured solely by the assets sold and
assumed by a transferee; and

(b) property that within 30 days of such Asset Sale is converted into
cash or Cash Equivalents; provided, that, such cash and Cash Equivalents
shall be treated as Net Cash Proceeds attributable to the original Asset
Sale for which such property was received.

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Within 360 days after the receipt of any Net Proceeds from an Asset Sale, HDA
may apply such Net Proceeds at its option to the repurchase of the notes and
such other indebtedness on a parity with the notes and with similar provisions
requiring HDA to make an offer to purchase such indebtedness with the proceeds
from asset sales pursuant to a cash offer, pro rata in proportion to the
respective principal amounts, or accreted values in the case of indebtedness
issued with an original issue discount, of the notes and such other
indebtedness then outstanding (the "Asset Sale Offer") at a purchase price of
100% of principal amount or accreted value in the case of indebtedness issued
with an original issue discount (the "Asset Sale Offer Price") together with
accrued and unpaid interest and liquidated damages, if any, to the date of
payment, made within 330 days of such Asset Sale.

Within 330 days after the receipt of any Net Proceeds from an Asset Sale, HDA
may apply such Net Proceeds at its option:

(1) to redeem the notes in accordance with the terms of the indenture and
other indebtedness of HDA ranking on a parity with the notes and with similar
provisions requiring HDA to redeem such indebtedness with the proceeds for
asset sales, pro rata in proportion to the respective principal amounts or
accreted values in the case of indebtedness issued with an original issue
discount of the notes and such other indebtedness then outstanding;

(2) to invest in assets and property or other Permitted Investments pursuant
to clause (d) of the definition of Permitted Investments below, which in the
good faith reasonable judgment of the board will immediately constitute or be a
part of a Related Business of HDA or such subsidiary immediately following such
transaction; or

(3) to retire Purchase Money Indebtedness or senior debt and to permanently
reduce, in the case of senior debt that is not Purchase Money Indebtedness, the
amount of such indebtedness outstanding on the Issue Date or permitted pursuant
to paragraph (b) or (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," including that in the case of a
revolver or similar arrangement that makes credit available, such commitment is
so permanently reduced by such amount.

Pending the final application of any such Net Proceeds, HDA may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $5.0 million, HDA will make an
Asset Sale Offer to all holders of notes, and all holders of other Indebtedness
that is pari passu with the notes containing provisions similar to those set
forth in the indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets, to purchase the maximum principal amount of notes
and such other pari passu indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of
principal amount or accreted value in the case of indebtedness issued with an
original issue discount plus accrued and unpaid interest to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, HDA may use such Excess Proceeds for any
purpose not otherwise prohibited by the indenture. If the aggregate principal
amount of notes and such other pari passu indebtedness tendered in such Asset
Sale Offer exceeds the amount of Excess Proceeds, the notes and such other pari
passu indebtedness will be purchased on a pro rata basis. Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

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Notwithstanding, and without complying with, the provisions of this Asset
Sales covenant,

(1) HDA and its subsidiaries may, in the ordinary course of business,

(a) convey, sell, transfer, assign or otherwise dispose of inventory and
other assets acquired and held for resale in the ordinary course of
business and

(b) liquidate Cash Equivalents;

(2) HDA and its subsidiaries may convey, sell, transfer, assign or otherwise
dispose of assets pursuant to and in accordance with the covenant "Limitation
on Merger, Sale or Consolidation";

(3) HDA and its subsidiaries may sell or dispose of damaged, worn out or
other obsolete property in the ordinary course of business so long as such
property is no longer necessary for the proper conduct of the business of HDA
or such subsidiary, as applicable;

(4) HDA and the guarantors may convey, sell, transfer, assign or otherwise
dispose of assets to HDA or any of the guarantors;

(5) HDA and its subsidiaries, in the ordinary course of business, may convey,
sell transfer, assign, or otherwise dispose of assets, or related assets in
related transactions, with a fair market value of less than $250,000;

(6) HDA and each of its subsidiaries may surrender or waive contract rights
or settle, release or surrender of contract, tort or other claims of any kind
or grant Liens not prohibited by the indenture; and

(7) HDA may sell accounts receivable and related assets of the type specified
in the definition of Qualified Receivables Transaction to a Receivables
Subsidiary for the fair market value thereof, but in any case including cash in
an amount at least equal to 75% of the book value thereof as determined in
accordance with GAAP, and a Receivables Subsidiary may transfer accounts
receivable and related assets of the type specified in the definition of
Qualified Receivables Transaction, or a fractional undivided interest therein,
in a Qualified Receivables Transaction.

Selection and Notice

If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption on a pro rata basis or by lot.

Notes in denominations of $1,000 shall only be redeemed in whole. The notes
may be redeemed in part in multiples of $1,000 only. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days
before the redemption date to each holder of notes to be redeemed at its
registered address.

If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the unredeemed portion of the principal
amount. A new note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the holder of that note upon
surrender of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on notes or portions of them called for redemption, unless HDA defaults
in the payment of the notes.

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Covenants

Restricted Payments

HDA and the guarantors will not, and will not permit any of their respective
subsidiaries to, directly or indirectly (all such payments and other actions
set forth in clauses (1) through (4) below collectively referred to as
"Restricted Payments"):

(1) declare or pay any dividend or make any other payment or distribution on
account of HDA's or any of the guarantors', or any of their respective
Restricted Subsidiaries', Equity Interests, other than dividends or
distributions payable in Qualified Capital Stock of HDA, the guarantors, or
their respective Subsidiaries;

(2) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of HDA or any of the guarantors, or any of their respective
subsidiaries, or any subsidiary or parent of HDA or any of the guarantors, or
any of their respective subsidiaries, other than any such Equity Interests
owned by HDA, the guarantors, or their respective subsidiaries;

(3) other than with the proceeds from the substantially concurrent sale of,
or in exchange for, Refinancing Indebtedness,

. make any payment on or in respect of any amendment of the terms of
Subordinated Indebtedness or make any payment on or in respect of any
defeasance of Subordinated Indebtedness, or

. purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness,

directly or indirectly, by HDA or any of the guarantors, or any of their
respective subsidiaries, or a parent or subsidiary of HDA or any of the
guarantors, or any of their respective subsidiaries. Nor may the entities,
prior to the scheduled maturity, make any scheduled repayment of principal, or
scheduled sinking fund payment, as the case may be, of such indebtedness; or

(4) make any Restricted Investment,

unless, at the time of and after giving effect to such Restricted Payment:

(1) no default or event of Default shall have occurred and be continuing; and

(2) HDA would, at the time of such Restricted Payment and after giving pro
forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur
at least $1.00 of additional indebtedness pursuant to the Debt Incurrence Ratio
test set forth in the first paragraph of the covenant described below under the
caption "--Incurrence of Additional Indebtedness and Disqualified Capital
Stock"; and

(3) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by HDA and its Restricted Subsidiaries after the date
of the indenture, excluding Restricted Payments permitted by clauses (2) and
(3) of the next succeeding paragraph, is less than the sum, without
duplication, of

(a) 50% of the aggregate Consolidated Net Income of HDA for the period,
taken as one accounting period, from the beginning of the first fiscal
quarter commencing after the date of the indenture to and including the
last day of HDA's most recently ended fiscal quarter ended

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immediately prior to the date of each such calculation, or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit, plus

(b) 100% of the aggregate net cash proceeds received by HDA from the sale
of its Qualified Capital Stock, other than to a subsidiary and to the
extent applied in connection with a Qualified Exchange, plus

(c) to the extent not included in Consolidated Net Income, 100% of any
dividends or other distributions received by HDA or a Subsidiary of HDA
after the date of the indenture from an Unrestricted Subsidiary of HDA,
plus

(d) to the extent that any Restricted Investment that was made after the
date of the indenture is sold for cash or otherwise liquidated or repaid
for cash, the lesser of (i) the cash return of capital with respect to such
Restricted Investment, less the cost of disposition, if any, and (ii) the
initial amount of such Restricted Investment, plus

(e) 100% of the aggregate net Cash Equivalent proceeds received by HDA,
other than from its subsidiaries, from Capital Contributions after the date
of the indenture.

So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:

(1) to the extent such payments would constitute a Restricted Payment, the
payments of amounts to Brentwood in accordance with the administrative services
agreement;

(2) repurchases of capital stock from employees of HDA, a parent or their
subsidiaries upon the death, disability or termination of employment in an
aggregate amount to all employees not to exceed $1.0 million per year or $3.0
million in the aggregate on and after the date of the indenture;

(3) any dividend, distribution or other payments by any subsidiary of HDA on
its Equity Interests that is paid pro rata to all holders of such Equity
Interests;

(4) a Qualified Exchange;

(5) the payment of any dividend on Qualified Capital Stock within 60 days
after the date of its declaration if such payment would have complied with the
provisions of the indenture; or

(6) Permitted Payments to parent.

The amount of any Restricted Payment, other than cash, shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by HDA or any of the
guarantors, or their respective subsidiaries, as the case may be, pursuant to
the Restricted Payment. The fair market value of any assets or securities that
are required to be valued by this covenant shall be determined in the good
faith reasonable judgment of the board of directors of HDA. Additionally,
within 5 days of each Restricted Payment in excess of $1.0 million, HDA shall
deliver an officers' certificate to the trustee describing in reasonable detail
the nature of such Restricted Payment, stating the amount of such Restricted
Payment, stating in reasonable detail the provisions of the indenture pursuant
to which such Restricted Payment was made and certifying that such Restricted
Payment was made in compliance with the terms of the indenture.

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Incurrence of Additional Indebtedness and Disqualified Capital Stock

HDA and the guarantors will not, and will not permit any of their respective
subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to, or otherwise become responsible
for, contingently or otherwise (collectively, "incur") any indebtedness or any
Disqualified Capital Stock, including Acquired Indebtedness, other than
Permitted Indebtedness. Notwithstanding the foregoing, if

(1) no default or event of default shall have occurred and be continuing at
the time of, or would occur after giving effect on a pro forma basis to, such
incurrence of indebtedness or Disqualified Capital Stock and

(2) on the date of such incurrence (the "Incurrence Date"), the Consolidated
Coverage Ratio of HDA for the Reference Period immediately preceding the
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such indebtedness or Disqualified Capital Stock and, to the extent set forth in
the definition of Consolidated Coverage Ratio, the use of proceeds thereof,
would be at least 2 to l (the "Debt Incurrence Ratio"),

then HDA and the guarantors may incur such indebtedness or Disqualified Capital
Stock.

In addition, the foregoing limitations will not apply to:

(1) the incurrence by HDA or any of its subsidiaries of Purchase Money
Indebtedness, provided that:

(a) the aggregate amount of such indebtedness incurred and outstanding at
any time pursuant to this paragraph (1), plus any indebtedness issued to
retire, defease, refinance, replace or refund such indebtedness, shall not
exceed $10.0 million, and

(b) in each case, such indebtedness shall not constitute more than 100%
of the cost determined in accordance with GAAP, to HDA or such subsidiary,
as applicable, of the property so purchased or leased.

(2) if no event of default shall be continuing after application of the
proceeds from such incurrence, the incurrence by HDA or any guarantor of
indebtedness in an aggregate amount incurred and outstanding at any time
pursuant to this paragraph (b), plus any indebtedness incurred to retire,
defease, refinance, replace or refund such indebtedness, of up to $10.0
million; and

(3) the incurrence by HDA or any guarantor of indebtedness pursuant to the
credit agreement in an aggregate amount incurred and outstanding at any time
pursuant to this paragraph (3), plus any indebtedness incurred to retire,
defease, refinance, replace or refund such indebtedness, of up to $75.0
million, minus the amount of any such indebtedness:

(a) retired with the Net Cash Proceeds from any Asset Sale applied to
permanently reduce the outstanding amounts or the commitments with respect
to such indebtedness pursuant to clause (3) of the third paragraph under
the "Asset Sales" covenant described above; or

(b) assumed by a transferee in an Asset Sale;

provided, however, that neither HDA nor any guarantor may incur
indebtedness pursuant to this clause (3) the proceeds of which are used to
finance one or more acquisitions, including the repayment of any Acquired
Indebtedness substantially concurrently with such acquisition, unless the
Consolidated Coverage Ratio for the Reference Period immediately preceding
the Incurrence

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Date, after giving effect on a pro forma basis to such incurrence of
indebtedness, would be greater than the ratio set forth below opposite such
period:

[Download Table]

Consolidated
Coverage
Reference Period ending Ratio
----------------------- ------------

Prior to June 30, 1999.......................................... 1.50 to 1.00
June 30, 1999-June 29, 2000..................................... 1.75 to 1.00
June 30, 2000-June 29, 2001..................................... 1.90 to 1.00
June 30, 2001-June 29, 2002..................................... 2.00 to 1.00
June 30, 2002-and thereafter.................................... 2.25 to 1.00

For purposes of this clause (3) only, Consolidated EBITDA as used to determine
the Consolidated Coverage Ratio shall be calculated after giving pro forma
effect to:

(a) any acquisition, including the Stone acquisition and the City
Recapitalization, occurring during the Reference Period as if such
acquisition occurred at the beginning of the Reference Period; and

(b) any Approved Cost Savings anticipated to be realized over the next
four fiscal quarters in connection with an acquisition, including the Stone
acquisition and the City Recapitalization, occurring during the Reference
Period.

For each full fiscal quarter completed after consummation of an acquisition
occurring during the Reference Period, 25% of the Approved Cost Savings
associated with such acquisition shall be excluded from the calculation of
Consolidated EBITDA, and comparable pro rata exclusions shall be made for post-
Acquisition periods of less than a full fiscal quarter. Such aggregate Approved
Cost Savings shall not exceed 25% of Consolidated EBITDA for any Reference
Period.

Indebtedness or Disqualified Capital Stock of any Person which is outstanding
at the time such Person becomes a subsidiary of HDA, including upon designation
of any subsidiary or other person as a subsidiary, or is merged with or into or
consolidated with HDA or a subsidiary of HDA shall be deemed to have been
incurred at the time such Person becomes such a subsidiary of HDA or is merged
with or into or consolidated with HDA or a subsidiary of HDA, as applicable.

Upon each incurrence, HDA may designate pursuant to which provision of this
covenant such indebtedness or Disqualified Capital Stock is being incurred and
such indebtedness or Disqualified Capital Stock shall not be deemed to have
been incurred or outstanding under any other provision of this covenant, except
as stated otherwise in any such provision or applicable definition.

No Senior Subordinated Debt

HDA will not incur, create, issue, assume, guarantee or otherwise become
liable for any indebtedness that is subordinate or junior in right of payment
to any other indebtedness of HDA and senior in any respect in right of payment
to the notes. No guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any indebtedness that is subordinate or junior in
right of payment to any other indebtedness of such guarantor and senior in any
respect in right of payment to such guarantor's subsidiary guarantee.

Liens

HDA and the guarantors will not, and will not permit any of their respective
subsidiaries to, create, incur, assume or suffer to exist any Lien, other than
Permitted Liens, on any asset now owned

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or acquired on or after the date of the indenture or on any income or profits
therefrom securing any indebtedness of HDA or any guarantor unless all payments
due under the notes, and the guarantees, as applicable, are secured on an equal
and ratable basis with the obligations so secured, provided, that, if such
indebtedness is subordinated indebtedness, the Lien securing such subordinated
indebtedness shall be subordinate and junior to the Lien securing the notes
with the same relative priority as such subordinated indebtedness shall have
with respect to the notes.

Dividend and Other Payment Restrictions Affecting Subsidiaries

HDA and the guarantors will not, and will not permit any of their respective
subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual restriction on the ability of any subsidiary of HDA
to:

(1) pay dividends or make any other distributions to or on behalf of HDA or
any subsidiary of HDA;

(2) pay any obligation to or on behalf of HDA or any subsidiary of HDA;

(3) make or pay loans or advances to or on behalf of HDA or any subsidiary of
HDA; or

(4) transfer any assets or property to or on behalf of HDA or any subsidiary
of HDA.

However, the preceding restrictions will not apply to restrictions existing
under or by reason of:

(1) the indenture and the notes or by other indebtedness of HDA ranking
senior or pari passu with the notes or the guarantees, as applicable, provided,
such restrictions taken as a whole are no more restrictive than those imposed
by the indenture and the notes;

(2) applicable law;

(3) indebtedness outstanding on the date of the indenture, including pursuant
to the credit agreement;

(4) any Acquired Indebtedness not incurred in violation of the indenture or
any agreement relating to any property, asset, or business acquired by HDA or
any of its subsidiaries, which restrictions in each case existed at the time of
acquisition, were not put in place in connection with or in anticipation of
such acquisition and are not applicable to any person, other than the person
acquired, or to any property, asset or business, other than the property,
assets and business so acquired;

(5) indebtedness incurred under the credit agreement pursuant to clause (3)
of the covenant described herein "Incurrence of Additional Indebtedness and
Disqualified Capital Stock," provided, in each case, such restriction or
requirement is no more restrictive taken as a whole than that imposed by the
credit agreement as of the date of the indenture;

(6) any binding agreement which has been entered into for the sale or
disposition of all or substantially all of the Equity Interests or assets of a
subsidiary of HDA, provided, such restrictions apply solely to the Equity
Interests or assets of such subsidiary which are being sold;

(7) Purchase Money Indebtedness incurred pursuant to clause (1) of the second
paragraph of the "Incurrence of Additional Indebtedness and Disqualified
Capital Stock" covenant described above,

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provided, such restrictions relate only to the transfer of the property
acquired with the proceeds of such Purchase Money Indebtedness;

(8) indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction, provided,
that, such restrictions apply only to such Receivables Subsidiary;

(9) permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such permitted Refinancings are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced; and

(10) customary provisions restricting subletting or assignment of any lease
entered into in the ordinary course of business, consistent with industry
practice.

Notwithstanding the foregoing, any asset subject to a Lien which is not
prohibited to exist with respect to that asset pursuant to the terms of the
indenture may be subject to restrictions on the transfer or disposition thereof
in accordance with any such Liens.

Merger, Consolidation, or Sale of Assets

HDA may not, directly or indirectly: (1) consolidate or merge with or into
another Person; or (2) sell, convey or transfer all or substantially all of its
assets, in one or more related transactions, to another Person or group of
affiliated Persons, unless:

(1) either: (a) HDA is the surviving corporation; or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of HDA in connection
with the notes and the indenture;

(2) immediately after such transaction no default or event of default exists;
and

(3) HDA or the Person formed by or surviving any such consolidation or merger
will, on the date of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional indebtedness pursuant to the Debt Incurrence Ratio test set forth in
the first paragraph of the covenant described above under the caption "--
Incurrence of Additional Indebtedness and Disqualified Capital Stock."

Transactions with Affiliates

HDA and its subsidiaries will not enter into or suffer to exist any contract,
agreement, arrangement or transaction with any affiliate (each, an "affiliate
transaction"), unless:

(1) such affiliate transaction is on terms that are fair and reasonable to
HDA and no less favorable to HDA than could have been obtained in an arm's
length transaction with a non-affiliate; and

(2) HDA delivers to the trustee:

(a) with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in excess of $1.0
million, a resolution of the board of directors set forth in an officers'
certificate certifying that such affiliate transaction complies with this

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covenant and that such affiliate transaction has been approved by a
majority of the disinterested members of the board of directors; and

(b) with respect to any affiliate transaction or series of related
affiliate transactions involving aggregate consideration in excess of $5.0
million, a written favorable opinion as to the fairness to HDA of such
affiliate transaction from a financial point of view issued by an
independent accounting, appraisal or investment banking firm of national
standing.

The following items shall not be deemed to be affiliate transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

(1) customary employee compensation arrangements approved by a majority of
independent members of the board of directors of HDA;

(2) Restricted Payments that are permitted by the provisions of the indenture
described above under the caption "--Restricted Payments."

(3) transactions between or among HDA and any of its wholly-owned
consolidated subsidiaries or solely among wholly-owned consolidated
subsidiaries of HDA;

(4) the administrative services agreement;

(5) leases entered into concurrently with the closing of the acquisition by
BABF City Corp. of 80% of the outstanding common stock of City Truck and
Trailer Parts, Inc. on June 1, 1998;

(6) leases entered into concurrently with the closing of the acquisition of
substantially all of the assets of Stone Heavy Duty, Inc. on June 19, 1998;

(7) Permitted Investments; and

(8) Capital Contributions from parent to HDA or any guarantor;

Additional Subsidiary Guarantees

If HDA acquires or creates other subsidiaries after the date of the
indenture, then each such newly acquired or created subsidiary, other than
Receivables Subsidiaries and Foreign Subsidiaries, must become a guarantor and
execute a supplemental indenture satisfactory to the trustee and deliver an
opinion of counsel to the trustee within 5 business days of the date on which
it was acquired or created. If HDA acquires or creates any Foreign Subsidiaries
after the date of the indenture, then each such newly acquired or created
Foreign Subsidiary (a) which guarantees or otherwise becomes liable for
indebtedness of HDA or any guarantor or (b) more than 65% of the capital stock
of which becomes pledged to secure any indebtedness of HDA or any guarantor,
must become a guarantor and execute a supplemental indenture satisfactory to
the trustee and deliver an opinion of counsel to the trustee within 5 business
days of the date on which it was acquired or created.

Release of Guarantors

The guarantors will not consolidate or merge with or into another person
unless:

(1) (a) the person formed by or surviving any such consolidation or merger
assumes all the obligations of such guarantor pursuant to a supplemental
indenture reasonably satisfactory to the trustee and unconditionally
guarantees, on a senior subordinated basis, all of such guarantor's obligations
under such guarantor's guarantee on the terms set forth in the indenture and

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(b) immediately before and immediately after giving effect to such transaction
on a pro forma basis, no default or event of default exists; or

(2) the other person is another guarantor or HDA.

On the sale or disposition,whether by merger, stock purchase, asset sale or
otherwise, of a guarantor or all of its assets to an entity which is not a
guarantor, or the designation of a subsidiary to become an Unrestricted
Subsidiary, which transaction is otherwise in compliance with the indenture,
such guarantor will be released from its obligations under its guarantee of the
notes; provided, however, that any such termination shall occur only to the
extent that all obligations of such guarantor under all of its guarantees of,
and under all of its pledges of assets or other security interests which
secure, any indebtedness of HDA or any other subsidiary of HDA will also
terminate upon such release, sale or transfer.

Business Activities

HDA and its subsidiaries, other than Receivables Subsidiaries, will not
directly or indirectly engage to any substantial extent in any business other
than that which, in the reasonable good faith judgment of the board of
directors of HDA, is a Related Business.

Status as Investment Company

HDA and its subsidiaries will not become required to register as an
"investment company," as that term is defined in the Investment Company Act of
1940, or otherwise become subject to regulation under the Investment Company
Act.

Reports

Whether or not required by the Commission, so long as any notes are
outstanding, HDA and the parent will furnish to the trustee and to holders of
notes, within 15 days after the time periods specified in the Commission's
rules and regulations:

(1) all quarterly and annual financial information that would be required to
be contained in a filing with the Commission on Forms 10-Q and 10-K if HDA were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report on the annual financial statements by HDA's
and the parent's certified independent accountants; and

(2) all other reports that would be required to be filed with the Commission,
including on Form 8-K, if HDA were required to file such reports.

HDA and the parent are not required to furnish separate financial results of
their subsidiaries unless otherwise required to do so by the Commission.
Whether or not required by the Commission, HDA will file a copy of all of the
information and reports referred to in clauses (1) and (2) above with the
Commission for public availability within 15 days after the time periods
specified in the Commission's rules and regulations, unless the Commission will
not accept such a filing.

Events of Default and Remedies

Each of the following is an event of default:

(1) default for 30 days in the payment when due of interest on the notes,
whether or not prohibited by the subordination provisions of the indenture;

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(2) default in payment when due of the principal of or premium, if any, on
the notes, including, without limitation, payment of the Change of Control
Purchase Price or the Asset Sale Offer Price on notes validly tendered pursuant
to a Change of Control Offer or Asset Sale Offer, as applicable, or otherwise,
whether or not prohibited by the subordination provisions of the indenture;

(3) failure by HDA or any subsidiary of HDA to observe or perform any other
covenant or agreement contained in the notes or the indenture and the
continuance of such failure for a period of 30 days after written notice is
given to HDA by the trustee or to HDA and the trustee by the holders of at
least 25% in aggregate principal amount of the notes outstanding, subject to
certain exceptions;

(4) certain events of bankruptcy, insolvency or reorganization in respect of
HDA or any of its Significant Subsidiaries;

(5) default on indebtedness of HDA or any of its subsidiaries with an
aggregate principal amount in excess of $5.0 million if that default:

(a) is caused by a failure to pay principal at maturity, or

(b) results in the acceleration of such indebtedness prior to its stated
maturity;

(6) any of the guarantees ceases to be in full force and effect or any of the
guarantees is declared to be null and void and unenforceable or any of the
guarantees is found to be invalid or any of the guarantors or parent denies its
liability under its guarantee, other than by reason of release of a guarantor
in accordance with the terms of the indenture; and

(7) failure by HDA or any of its subsidiaries to pay final unsatisfied
judgments not covered by insurance aggregating in excess of $5.0 million, which
judgments are not stayed, bonded or discharged within 60 days.

In the case of an event of default arising from certain events of bankruptcy
or insolvency, with respect to HDA, all principal and accrued interest on
outstanding notes will become due and payable immediately without further
action or notice. The holders of a majority in aggregate principal amount of
notes generally are authorized to rescind such acceleration if all existing
events of default, other than the non-payment of the principal of, premium, if
any, and interest on the notes which have become due solely by such
acceleration and except on default with respect to any provision requiring a
supermajority approval to amend, which default may only be waived by such a
supermajority, and have been cured or waived.

If any other event of default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding notes may
declare all principal, determined as set forth below, and accrued interest on
the notes to be due and payable immediately; provided, however, that if any
senior debt is outstanding pursuant to the credit agreement, upon a declaration
of such acceleration, such principal and interest shall be due and payable upon
the earlier of:

(a) the fifth Business Day after the sending to HDA and the
Representative under the credit agreement of such written notice, unless
such event of default is cured or waived prior to such date; and

(b) the date of acceleration of any indebtedness under the credit
agreement.

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In the event a declaration of acceleration resulting from an event of default
described in clause (5) above has occurred and is continuing, such declaration
of acceleration shall be automatically annulled if within 15 days of the
declaration:

(1) such default is cured or waived or the holders of the indebtedness which
is the subject of such default have rescinded their declaration of acceleration
in respect of such indebtedness;

(2) the trustee has received written notice or such cure, waiver or
rescission;

(3) the annulment of the acceleration of the notes would not conflict with
any judgment or decree of a court of competent jurisdiction; and

(4) all existing events of default, except nonpayment of principal or
interest on the notes that became due solely because of the acceleration of the
notes, have been cured or waived and no other event of default described in
clause (5) above has occurred that has not been cured or waived within 15 days
of the declaration of such acceleration in respect of such indebtedness.

Prior to the declaration of acceleration of the maturity of the notes, the
holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture except a default with respect to any provision requiring a
supermajority approval to amend, which default may only be waived by such a
supermajority, and except a continuing default or event of default in the
payment of interest on, or the principal of, the notes not yet cured or a
default with respect to any covenant or provision which cannot be modified or
amended without the consent of the holder of each outstanding note affected.

Subject to the provisions of the indenture relating to the duties of the
trustee, the trustee will be under no obligation to exercise any of its rights
or powers under the indenture at the request, order or direction of any of the
holders, unless such holders have offered to the trustee reasonable security or
indemnity. Subject to all provisions of the indenture and applicable law, the
holders of a majority in aggregate principal amount of the notes at the time
outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or
exercising any trust or power conferred on the trustee.

No Personal Liability of Directors, Officers, Employees and Stockholders

No direct or indirect stockholder, employee, officer or director, as such,
past, present or future of the parent, HDA, the guarantors or any successor
entity shall have any personal liability for any obligations of HDA or the
guarantors under the indenture or the notes solely by reason of his or its
status as such stockholder, employee, officer or director, except that this
provision shall in no way limit the obligation of the parent or any guarantor
pursuant to any guarantee of the notes. Each holder of notes by accepting a
note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not be effective to
waive liabilities under the federal securities laws.

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Legal Defeasance and Covenant Defeasance

HDA may, at its option and at any time, elect to have its obligations and the
obligations of the guarantors and the parent discharged with respect to the
outstanding notes ("Legal Defeasance") except for:

(1) the rights of holders to receive payments in respect of the principal of,
premium, if any, and interest, and liquidated damages, if any, on those notes
when such payments are due from the trust funds;

(2) HDA's obligations with respect to those notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or stolen
notes, and the maintenance of an office or agency for payment and money for
security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the trustee, and
HDA's obligations in connection therewith; and

(4) the Legal Defeasance provisions of the indenture.

In addition, HDA may, at its option and at any time, elect to have the
obligations of HDA, the parent and the guarantors released with respect to
certain covenants that are described in the indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a default or event of default with respect to the notes. In the event Covenant
Defeasance occurs, some of the events, not including non-payment, guarantees,
bankruptcy, receivership, rehabilitation and insolvency events, described under
"Events of Default" will no longer constitute an event of default with respect
to the notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) HDA must irrevocably deposit with the trustee, in trust, for the benefit
of the holders of the notes, U.S. legal tender, U.S. Government Obligations or
a combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the notes on the stated date for
payment of the notes or on the redemption date of such principal or installment
of principal of, premium, if any, or interest on such notes, and the holders of
notes must have a valid, perfected, exclusive security interest in such trust;

(2) in the case of Legal Defeasance, HDA shall have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the trustee
confirming that (a) HDA has received from, or there has been published by the
Internal Revenue Service, a ruling or (b) since the date of the indenture,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of counsel shall
confirm that, the holders of those notes will not recognize income, gain or
loss for federal income tax purposes as a result of the Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if the Legal Defeasance had
not occurred;

(3) in the case of Covenant Defeasance, HDA shall have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that the holders of the notes will not recognize income,
gain or loss for federal income tax purposes as a result of the Covenant
Defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if the
Covenant Defeasance had not occurred;

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(4) no default or event of default shall have occurred and be continuing on
the date of such deposit or insofar as events of default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit;

(5) Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under the indenture or any other material
agreement or instrument to which HDA or any of its subsidiaries is a party or
by which HDA or any of its subsidiaries is bound;

(6) HDA shall have delivered to the trustee an officers' certificate stating
that the deposit was not made by HDA with the intent of preferring the holders
of the notes over any other creditors of HDA or with the intent of defeating,
hindering, delaying or defrauding any other creditors of HDA or others; and

(7) HDA shall have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that the conditions precedent provided for in,
in the case of the officers' certificate, (1) through (6) and, in the case of
the opinion of counsel, clauses (1), (with respect to the validity and
perfection of the security interest) (2), (3) and (5) of this paragraph have
been complied with and HDA shall have delivered to the trustee an officers'
certificate to the effect that, assuming no holder of the notes is an insider
of HDA, the trust funds will not be subject to the effect of any applicable
Federal bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally.

If the funds deposited with the trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
and interest on the notes when due, then the obligations of HDA, the parent and
the guarantors under the indenture will be revived and no such defeasance will
be deemed to have occurred.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, with the consent of
the holders of not less than a majority in aggregate principal amount of the
notes at the time outstanding, HDA, the parent, the guarantors and the trustee
are permitted to amend or supplement the indenture or any supplemental
indenture or modify the rights of the holders.

Without the consent of each holder affected, an amendment or waiver may not,
with respect to any notes held by a non-consenting holder:

(1) change the Stated Maturity on any note, or reduce the principal amount of
any note or the rate, or extend the time for payment, of interest thereon or
any premium payable upon the redemption at the option of HDA of the notes, or
change the place of payment where, or the coin or currency in which, any note
or any premium or the interest on the notes is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity of the notes, or, in the case of redemption at the option of HDA, on
or after the Redemption Date, or reduce the Change of Control Purchase Price or
the Asset Sale Offer Price, after the occurrence of an event giving rise to a
Change of Control Offer or an Asset Sale Offer, respectively, or alter the
provisions, including the defined terms used therein, regarding the right of
HDA to redeem the notes as a right, or at the option of HDA in a manner adverse
to the holders;

(2) reduce the percentage in principal amount of the outstanding notes, the
consent of whose holders is required for any such amendment, supplemental
indenture or waiver provided for in the indenture; or

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(3) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture cannot
be modified or waived without the consent of the holder of each outstanding
note affected thereby.

Notwithstanding the preceding, without the consent of holders of at least 66
2/3% in aggregate principal amount of notes at the time outstanding, an
amendment or supplement or waiver may not modify the provisions, including the
defined terms used therein, of the covenant "Repurchase of Notes at the Option
of Holders--Change of Control" in a manner adverse to the holders.

Notwithstanding the preceding, without the consent of any holder of notes,
HDA and the trustee may amend or supplement the indenture or the notes:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated notes in addition to or in place of
certificated notes;

(3) to provide for the assumption of HDA's obligations to holders of notes in
the case of a merger or consolidation or sale of all or substantially all of
HDA's assets;

(4) to make any change that would provide any additional rights or benefits
to the holders of notes or that does not adversely affect the legal rights
under the indenture of any such holder;

(5) to comply with the procedures of the Depositary or the trustee with
respect to the provisions of the indenture and the notes relating to transfers
of notes; or

(6) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.

Discharge of Indenture

HDA may terminate certain of its obligations and the obligations of the
parent and the guarantors with respect to the outstanding notes and the
indenture. Some of the provisions of the indenture will survive such
termination, including, without limitation:

(1) rights of holders to receive payments in respect of the principal of,
premium, if any, and interest on the notes when such payments are due;

(2) HDA's obligations with respect to such notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes, and
the maintenance of an office or agency for payment and money for security
payments held in trust;

(3) the compensation, indemnification and replacement of the trustee, and
HDA's obligations in connection therewith; and

(4) the repayment to HDA of any funds from the trust, in certain
circumstances.

In order to effect such termination:

(1) HDA shall have given irrevocable and unconditional notice to the trustee
and mailed a notice of such redemption to each holder and the trustee for the
redemption of all notes;

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(2) HDA must irrevocably deposit with the trustee, in trust, for the benefit
of the holders of the notes, U.S. legal tender, U.S. Government Obligations or
a combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such notes on the stated date
for payment of the notes or on the redemption date of such principal or
installment of principal of, premium, if any, or interest on such notes, as the
case may be;

(3) HDA shall have paid all other sums payable by it under the indenture and
the notes; and

(4) HDA shall have delivered to the trustee an officers' certificate and an
opinion of counsel in the United States reasonably acceptable to the trustee,
each stating that the conditions precedent with respect to termination of HDA's
obligations as described herein provided for under the indenture and the notes
have been complied with.

Definitions

Set forth below are some of the defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.

"Acquired Indebtedness" means indebtedness or Disqualified Capital Stock of
any person existing at the time such person becomes a subsidiary of the
Company, including by designation, or is merged or consolidated into or with
the Company or one of its subsidiaries.

"Acquisition" means the purchase or other acquisition of any person or all or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.

"Administrative Services Agreement" means the corporate development and
administrative services agreement between the Company and Brentwood dated as of
May 29, 1998.

"Affiliate" means any person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company. For purposes of
this definition, the term "control" means the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise,
provided, that, with respect to ownership interest in the Company and its
Subsidiaries, a Beneficial Owner of 10% or more of the total voting power
normally entitled to vote in the election of directors, managers or trustees,
as applicable, shall for such purposes be deemed to constitute control.

"Approved Cost Savings" means with respect to cost savings associated with
any Acquisition (other than the Stone Acquisition and the City
Recapitalization), those cost savings that result from elimination of any of
the following items:

(1) accounting policy-related charges;

(2) private company expenses;

(3) excess officer or owner compensation;

(4) expenses not required to operate the acquired business on an ongoing
basis; and

(5) business-related charges.

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"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing

(1) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled principal (or
redemption) payment of such security or instrument and (b) the amount of each
such respective principal (or redemption) payment by

(2) the sum of all such principal (or redemption) payments.

"Beneficial Owner" or "beneficial owner" for purposes of the definitions of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.

"Board of Directors" means, with respect to any person, the board of
directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such person.

"Brentwood" means Brentwood Private Equity, L.L.C. and Brentwood Associates
Buyout Fund II, L.P. together with any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
Brentwood Private Equity, L.L.C. and Brentwood Associates Buyout Fund II, L.P.

"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.

"Change of Control" means

(1) prior to consummation of an Initial Public Equity Offering the Excluded
Persons shall cease to own beneficially and of record at least 51% of the
ordinary Voting Power represented by the Equity Interests of the Company unless
a Parent is formed after the date hereof and the Excluded Persons own
beneficially and of record at least 51% of the ordinary Voting Power of the
Parent and the Parent beneficially and of record owns 100% of the ordinary
Voting Power of the Company or

(2) following the consummation of an Initial Public Equity Offering,

(a) any merger or consolidation of the Company or Parent, as the case may
be, with or into any person or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of
the Company or Parent, as the case may be, on a consolidated basis, in one
transaction or a series of related transactions, if, immediately after
giving effect to such transaction(s),

(b) any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
(other than the Excluded Persons) is or becomes the "beneficial owner,"
directly or indirectly, of more than 35% of the total voting power in the
aggregate normally entitled to vote in the election of directors, managers,
or trustees, as applicable, of the transferee(s) or surviving entity or
entities, any "person" or "group" (as terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable)
(other than the Excluded Persons) is or becomes the "beneficial

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owner," directly or indirectly, of more than 35% of the total voting power
in the aggregate of all classes of Capital Stock of the Company or Parent,
as the case may be, then outstanding normally entitled to vote in elections
of directors,

(c) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Company or Parent, as the case may be,
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company or
Parent, as the case may be, was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved including new directors designated in or provided for in an
agreement regarding the merger, consolidation or sale, transfer or other
conveyance, of all or substantially all of the assets of the Company or
Parent, as the case may be, if such agreement was approved by a vote of
such majority of directors) cease for any reason to constitute a majority
of the Board of Directors of the Company or Parent, as the case may be,
then in office or

(d) the Company or Parent, as the case may be, adopts a plan of
liquidation.

"Capital Contribution" means any contribution to the equity of the Company
from a direct or indirect parent of the Company for which no consideration
other than the issuance of common stock with no redemption rights and no
special preferences, privileges or voting rights is given.

"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of, or interests (however designated) in,
stock issued by that corporation.

"Capitalized Lease Obligation" means, as to any person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.

"Cash Equivalent" means

(1) securities issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided,
that the full faith and credit of the United States of America is pledged in
support thereof); or

(2) time deposits and certificates of deposit and commercial paper issued by
the parent corporation of any domestic commercial bank of recognized standing
having capital and surplus in excess of $500.0 million; or

(3) commercial paper issued by others rated at least A-2 or the equivalent
thereof by Standard & Poor's Corporation or at least P-2 or the equivalent
thereof by Moody's Investors Service, Inc., and in the case of each of (1), (2),
and (3) maturing within one year after the date of acquisition.

"City Recapitalization" means the purchase by BABF City Corp., a company
formed by Brentwood, of 80% of the outstanding common stock of City Truck and
Trailer Parts, Inc. on June 1, 1998.

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"Consolidation" means, with respect to the Company, the consolidation of the
accounts of the Subsidiaries with those of the Company, all in accordance with
GAAP; provided, that "consolidation" will not include consolidation of the
accounts of any Unrestricted Subsidiary with the accounts of the Company. The
term "consolidated" has a correlative meaning to the foregoing.

"Consolidated Coverage Ratio" of any person on any date of determination (the
"Transaction Date") means the ratio, on a pro forma basis, of

(1) the aggregate amount of Consolidated EBITDA of such person attributable
to continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to

(2) the aggregate Consolidated Fixed Charges of such person (exclusive of
amounts attributable to operations and businesses permanently discontinued or
disposed of, but only to the extent that the obligations giving rise to such
Consolidated Fixed Charges would no longer be obligations contributing to such
person's Consolidated Fixed Charges subsequent to the Transaction Date) during
the Reference Period;

provided, that for purposes of such calculation,

(1) Acquisitions which occurred during the Reference Period or subsequent to
the Reference Period and on or prior to the Transaction Date shall be assumed
to have occurred on the first day of the Reference Period;

(2) transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period;

(3) the incurrence of any Indebtedness or issuance of any Disqualified
Capital Stock during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date (and the application of the proceeds
therefrom to the extent used to refinance or retire other Indebtedness) shall
be assumed to have occurred on the first day of the Reference Period; and

(4) the Consolidated Fixed Charges of such person attributable to interest on
any Indebtedness or dividends on any Disqualified Capital Stock bearing a
floating interest (or dividend) rate shall be computed on a pro forma basis as
if the average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to an Interest Swap or
Hedging Obligation (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used.

"Consolidated EBITDA" means, with respect to any person, for any period, the
Consolidated Net Income of such person for such period adjusted to add thereto
(to the extent deducted from net revenues in determining Consolidated Net
Income), without duplication, the sum of

(1) Consolidated income tax expense;

(2) Consolidated depreciation and amortization expense;

(3) Consolidated Fixed Charges; and

(4) other non-recurring, non-cash charges of such person and its consolidated
subsidiaries,

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less the amount of all cash payments made by such person or any of its
Subsidiaries during such period to the extent such payments relate to non-
recurring, non-cash charges that were added back in determining Consolidated
EBITDA for such period or any prior period, less any non-cash items increasing
Consolidated Net Income for such period.

"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of

(1) interest expensed or capitalized, paid, accrued, or scheduled to be paid
or accrued (including, in accordance with the following sentence, interest
attributable to Capitalized Lease Obligations) of such person and its
Consolidated Subsidiaries during such period, including

(a) original issue discount and non-cash interest payments or accruals on
any Indebtedness,

(b) the interest portion of all deferred payment obligations,

(c) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and
currency and Interest Swap and Hedging Obligations, in each case to the
extent attributable to such period, and

(d) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of such Person or of any Restricted Subsidiary of such
Person (other than dividends paid in Qualified Capital Stock) paid, accrued
or scheduled to be paid or accrued during such period times (y) a fraction,
the numerator of which is one and the denominator of which is one minus the
then current effective consolidated federal, state and local tax rate of
such Person, expressed as a decimal, and

(2) the amount of dividends accrued or payable (or guaranteed) by such person
or any of its Consolidated Subsidiaries in respect of Preferred Stock (other
than by Subsidiaries of such person to such person or such person's Wholly-
Owned Subsidiaries).

For purposes of this definition, (x) interest on a Capitalized Lease
Obligation shall be deemed to accrue at an interest rate reasonably determined
in good faith by the Company to be the rate of interest implicit in such
Capitalized Lease Obligation in accordance with GAAP and (y) interest expense
attributable to any Indebtedness represented by the guaranty by such person or
a Subsidiary of such person of an obligation of another person shall be deemed
to be the interest expense of such other person attributable to the
Indebtedness guaranteed.

"Consolidated Net Income" means, with respect to any person for any period,
the net income (or loss) of such person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period,
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication):

(1) all gains (but not losses) which are either extraordinary (as determined
in accordance with GAAP) or are either unusual or nonrecurring (including any
gain from the sale or other disposition of assets outside the ordinary course
of business or from the issuance or sale of any capital stock),

(2) the net income, if positive, of any person, other than a Consolidated
Subsidiary, in which such person or any of its Consolidated Subsidiaries has an
interest, except to the extent of the amount of any dividends or distributions
actually paid in cash to such person or a Consolidated Subsidiary of such
person during such period, but in any case not in excess of such person's pro
rata share of such person's net income for such period,

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(3) the net income or loss of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, and

(4) the net income, if positive, of any of such person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such Consolidated
Subsidiary.

"Consolidated Subsidiary" means, for any person, each Subsidiary of such
person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such person in accordance with GAAP.

"Credit Agreement" means the Revolving Credit Facility, including any related
notes, guarantees, collateral documents, instruments and agreements executed by
the Company or any of its Subsidiaries or other Affiliates in connection
therewith, as such credit agreement and/or related documents may be amended,
restated, supplemented, renewed, replaced or otherwise modified from time to
time whether or not with the same agent, trustee, representative lenders or
holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Credit Agreement" shall
include agreements in respect of Interest Swap and Hedging Obligations with
lenders party to the Credit Agreement and shall also include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any Credit Agreement and all refundings, refinancings and
replacements of any Credit Agreement, including any agreement:

(1) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby,

(2) adding or deleting borrowers or guarantors thereunder, so long as
borrowers and issuers include one or more of the Company and its Subsidiaries
and their respective successors and assigns,

(3) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, provided, that on the date such Indebtedness is
incurred it would not be prohibited by the covenant "Limitation on Incurrence
of Additional Indebtedness and Disqualified Capital Stock" or

(4) otherwise altering the terms and conditions thereof in a manner not
prohibited by the terms of the indenture.

"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.

"Designated Senior Debt" means

(1) Senior Debt originating under the Credit Agreement and

(2) any other Senior Debt in an aggregate outstanding principal amount in
excess of $25 million which is designated as Designated Senior Debt by the
Board of Directors.

"Disqualified Capital Stock" means

(1) except as set forth in (2), with respect to any person, Equity Interests
of such person that, by its terms or by the terms of any security into which it
is convertible, exercisable or exchangeable, is,

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or upon the happening of an event or the passage of time or both would be,
required to be redeemed or repurchased (including at the option of the holder
thereof) by such person or any of its Subsidiaries, in whole or in part, on or
prior to the Stated Maturity of the notes and

(2) with respect to any Subsidiary of such person (including with respect to
any Subsidiary of the Company), any Equity Interests other than any common
equity with no preference, privileges, or redemption or repayment provisions.

"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.

"Event of Loss" means, with respect to any property or asset, any

(1) loss, destruction or damage of such property or asset or

(2) any condemnation, seizure or taking, by exercise of the power of eminent
domain or otherwise, of such property or asset, or confiscation or requisition
of the use of such property or asset.

"Excluded Persons" means Brentwood, Larry Clayton and James Stone and

(1) any controlling stockholder, general partner, majority owned Subsidiary,
or spouse or immediate family member (in the case of an individual) of such
Person or

(2) (a) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding
80% or more of the Voting Stock of which consist of such Person and/or such
other Persons referred to in the immediately preceding clause (1) or (b) any
partnership the sole general partner of which is such Person or one of the
Persons referred to in clause (1).

"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
incorporated in a jurisdiction other than the United States of America and all
or substantially all of the sales, earnings or assets of which are located in,
generated from or derived from operations located in jurisdictions outside the
United States of America.

"GAAP" means United States generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.

"Guarantor" means all existing and future Subsidiaries of the Company other
than Receivables Subsidiaries and Foreign Subsidiaries; provided that any
Foreign Subsidiary that, pursuant to the terms of the indenture, guarantees the
obligations of the Company under the Securities and the indenture shall be
deemed to be a Guarantor.

"Incurrence Date" means the date on which a person directly or indirectly,
issues, assumes, guarantees, incurs, becomes directly or indirectly liable with
respect to (including as a result of an Acquisition), or otherwise become
responsible for, contingently or otherwise (collectively, "incur") any
Indebtedness or any Disqualified Capital Stock (including Acquired
Indebtedness).

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"Indebtedness" of any person means, without duplication,

(1) all liabilities and obligations, contingent or otherwise, of such person,
to the extent such liabilities and obligations would appear as a liability upon
the consolidated balance sheet of such person in accordance with GAAP,

(a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such person or only to a portion
thereof),

(b) evidenced by bonds, notes, debentures or similar instruments,

(c) representing the balance deferred and unpaid of the purchase price of
any property or services, except (other than accounts payable or other
obligations to trade creditors which have remained unpaid for greater than
60 days past their original due date) those incurred in the ordinary course
of its business that would constitute ordinarily a trade payable to trade
creditors;

(2) all liabilities and obligations, contingent or otherwise, of such person

(a) evidenced by bankers' acceptances or similar instruments issued or
accepted by banks,

(b) relating to any Capitalized Lease Obligation, or

(3) all net obligations of such person under Interest Swap and Hedging
Obligations;

(4) all liabilities and obligations of others of the kind described in the
preceding clause (1), (2) or (3) that such person has guaranteed or that is
otherwise its legal liability or which are secured by any assets or property of
such person;

(5) any and all deferrals, renewals, extensions, refinancing and refundings
(whether direct or indirect) of, or amendments, modifications or supplements
to, any liability of the kind described in any of the preceding clauses (1),
(2), (3) or (4), or this clause (5), whether or not between or among the same
parties; and

(6) all Disqualified Capital Stock of such Person and its Subsidiaries
(measured at the greater of its voluntary or involuntary maximum fixed
repurchase price plus accrued and unpaid dividends).

For purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Capital Stock, such Fair Market Value to be determined in good faith by the
board of directors of the issuer (or managing general partner of the issuer) of
such Disqualified Capital Stock.

"Initial Public Equity Offering" means an initial underwritten offering of
common stock of the Company or the Parent for cash pursuant to an effective
registration statement under the Securities Act following which the common
stock of the Company or the Parent is listed on a national securities exchange
or quoted on the national market system of the Nasdaq stock market.

"Interest Swap and Hedging Obligation" means any obligation of any person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate

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exchange agreement, currency exchange agreement or any other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency values, including, without limitation, any arrangement whereby,
directly or indirectly, such person is entitled to receive from time to time
periodic payments calculated by applying either a fixed or floating rate of
interest on a stated notional amount in exchange for periodic payments made by
such person calculated by applying a fixed or floating rate of interest on the
same notional amount.

"Investment" by any person in any other person means (without duplication)

(1) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition;

(2) the making by such person of any deposit with, or advance, loan or other
extension of credit to, such other person (including the purchase of property
from another person subject to an understanding or agreement, contingent or
otherwise, to resell such property to such other person) or any commitment to
make any such advance, loan or extension (but excluding accounts receivable,
endorsements for collection or deposits arising in the ordinary course of
business);

(3) other than guarantees of Indebtedness of the Company or any Guarantor to
the extent permitted by the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," the entering into by such person
of any guarantee of, or other credit support or contingent obligation with
respect to, Indebtedness or other liability of such other person;

(4) the making of any capital contribution by such person to such other
person; and

(5) the designation by the Board of Directors of the Company of any person to
be an Unrestricted Subsidiary.

The Company shall be deemed to make an Investment in an amount equal to the
fair market value of the net assets of any subsidiary (or, if neither the
Company nor any of its Subsidiaries has previously made an Investment in such
subsidiary, in an amount equal to the Investments being made), at the time that
such subsidiary is designated an Unrestricted Subsidiary, and any property
transferred to an Unrestricted Subsidiary from the Company or a Subsidiary of
the Company shall be deemed an Investment valued at its fair market value at
the time of such transfer.

"Issue Date" means the date of first issuance of the notes under the
indenture.

"Junior Security" means any Qualified Capital Stock and any Indebtedness of
the Company or a Guarantor, as applicable, that is subordinated in right of
payment to Senior Debt at least to the same extent as the notes or the
Guarantee, as applicable, and has no scheduled installment of principal due, by
redemption, sinking fund payment or otherwise, on or prior to the Stated
Maturity of the notes; provided, that, in the case of subordination in respect
of Senior Debt under the Credit Agreement, "Junior Security" shall mean any
Qualified Capital Stock and any Indebtedness of the Company or the Guarantor,
as applicable, that

(1) is unsecured,

(2) is not entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such Junior Securities than those in effect with
respect to the notes on the date hereof (or

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the Senior Debt under the Credit Agreement, including after giving effect to
any plan of reorganization or readjustment),

(3) shall not provide for amortization (including sinking fund and mandatory
prepayment or redemption provisions) commencing prior to the date that is six
months following the final scheduled maturity date of the Senior Debt under
the Credit Agreement (as modified by any plan of reorganization or
readjustment),

(4) if a new corporation or other entity results from any reorganization or
readjustment, such corporation or other entity assumes such Senior Debt,

(5) the rights of the holders of Senior Debt under the Credit Agreement are
not, without the consent of such holders, materially altered by any such
reorganization or readjustment, including without limitation, such rights
being materially impaired within the meaning of Section 1124 of Title 11 of
the United States Code or any material impairment of the right to receive
interest accruing during the pendency of a bankruptcy or insolvency
proceeding, including proceedings under Title 11 of the United States Code,
and

(6) by their terms or by law are subordinated to Senior Debt outstanding
under the Credit Agreement on the date of issuance of such Qualified Capital
Stock or Indebtedness at least to the same extent as the notes or the
Guarantee, as applicable.

"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable,
now owned or hereafter acquired.

"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Company in the case of a sale or Capital Contribution in
respect of Qualified Capital Stock and by the Company and its Subsidiaries in
respect of an Asset Sale plus, in the case of an issuance of Qualified Capital
Stock upon any exercise, exchange or conversion of securities (including
options, warrants, rights and convertible or exchangeable debt) of the Company
that were issued for cash on or after the Issue Date, the amount of cash
originally received by the Company upon the issuance of such securities
(including options, warrants, rights and convertible or exchangeable debt)
less, in each case, the sum of all payments, fees, commissions and (in the
case of Asset Sales, reasonable and customary) expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) incurred in connection with such Asset Sale or sale or Capital
Contribution in respect of Qualified Capital Stock, and, in the case of an
Asset Sale only, less the amount (estimated reasonably and in good faith by
the Company) of income, franchise, sales and other applicable taxes required
to be paid by the Company or any of its respective Subsidiaries in connection
with such Asset Sale in the taxable year that such sale is consummated or in
the immediately succeeding taxable year, the computation of which shall take
into account the reduction in tax liability resulting from any available
operating losses and net operating loss carry-overs, tax credits and tax
credit carry-forwards, and similar tax attributes.

"Non-Recourse Indebtedness" means Indebtedness

(1) as to which neither the Company nor any of its Subsidiaries

(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness),

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(b) is directly or indirectly liable (as a guarantor or otherwise), or

(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any of its Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.

"Obligation" means any principal, premium or interest payment, or monetary
penalty, or damages, due by the Company, the Parent or any Guarantor under the
terms of the notes or the indenture, including any liquidated damages due
pursuant to the terms of the Registration Rights Agreement.

"Offering Memorandum" means the final Offering Memorandum of the Company
dated July 28, 1998, relating to the offering of the Initial Securities in a
transaction exempt from the requirements of Section 5 of the Securities Act.

"Parent" means any Person, other than any Excluded Person, of which the
Company is a Subsidiary.

"Permitted Indebtedness" means that:

(1) The Company and the Guarantors may incur Indebtedness evidenced by the
notes and the Guarantees and represented by the indenture up to the $100.0
million issued on the Issue Date less any amounts refinanced, redeemed or
retired pursuant to clause (2) below;

(2) The Company and the Guarantors, as applicable, may incur Refinancing
Indebtedness with respect to any Indebtedness or Disqualified Capital Stock, as
applicable, described in clause (1) of this definition or incurred under the
Debt Incurrence Ratio test of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock," or which is
outstanding on the Issue Date (after giving effect to the repayment of
indebtedness as described under the heading "Use of Proceeds" in the Offering
Memorandum), provided, that, in each case such Refinancing Indebtedness is
secured only by the assets, if any, that secured the Indebtedness so
refinanced;

(3) The Company and its Subsidiaries may incur Indebtedness solely in respect
of bankers acceptances, letters of credit and performance bonds (to the extent
that such incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the ordinary
course of business in accordance with customary industry practices, in amounts
and for the purposes customary in the Company's industry in order to provide
security for workers' compensation, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business;

(4) The Company may incur Indebtedness to any Guarantor, and any Guarantor
may incur Indebtedness to any Guarantor or to the Company; provided, that, in
the case of Indebtedness of the Company, such obligations shall be unsecured
and subordinated in all respects to the Company's obligations pursuant to the
notes and any event that causes such Guarantor which loaned such Indebtedness
no longer to be a Guarantor shall be deemed to be a new incurrence subject to
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Stock;"

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(5) any Guarantor may guaranty any Indebtedness of the Company or another
Guarantor that was permitted to be incurred pursuant to the indenture,
substantially concurrently with such incurrence or at the time such person
becomes a Guarantor of the notes;

(6) Indebtedness or other contractual requirements of a Receivables
Subsidiary in connection with a Qualified Receivables Transaction, provided,
that, such restrictions apply only to such Receivables Subsidiary;

(7) a Receivables Subsidiary may incur Indebtedness in a Qualified
Receivables Transaction that is without recourse to the Company or to any
Subsidiary of the Company or their assets (other than such Receivables
Subsidiary and its assets), and is not guaranteed by any such person and is not
otherwise such person's legal liability;

(8) Interest Swap and Hedging Obligations of the Company covering
Indebtedness of the Company or any of its Restricted Subsidiaries and Interest
Swap and Hedging Obligations of any Restricted Subsidiary of the Company
covering Indebtedness of such Restricted Subsidiary, provided, however, that
such Interest Swap and Hedging Obligations are entered into to protect the
Company and its Restricted Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with the indenture to the extent the
notional principal amount of such Interest Swap and Hedging Obligation does not
exceed the principal amount of the Indebtedness to which such Interest Swap and
Hedging Obligation relates; and

(9) Any Foreign Subsidiary may incur Indebtedness to any other Foreign
Subsidiary; provided, that any event that causes the Foreign Subsidiary which
loaned such Indebtedness no longer to be a Subsidiary shall be deemed to be a
new incurrence subject to the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Stock."

"Permitted Investment" means Investments in

(1) any of the notes and the Guarantees;

(2) Cash Equivalents;

(3) intercompany notes to the extent permitted under clauses (4) and (9) of
the definition of "Permitted Indebtedness" provided, however, that any event
that causes the obligee on such inter-company notes no longer to be a
Subsidiary shall be deemed a new Investment subject to the covenant entitled
"Limitation on Restricted Payments";

(4) Investment by the Company or any Guarantor in a Person in a Related
Business if as a result of such Investment such Person immediately becomes a
Wholly-Owned Subsidiary Guarantor or such Person is immediately merged with or
into the Company or a Wholly-Owned Subsidiary Guarantor;

(5) the acquisition by a Receivables Subsidiary in connection with a
Qualified Receivables Transaction of Equity Interests of a trust or other
person established by such Receivables Subsidiary to effect such Qualified
Receivables Transaction;

(6) any Investment by the Company or any Guarantor in a Receivables
Subsidiary or any Investment by a Receivables Subsidiary in any other person in
connection with a Qualified Receivables Transaction; provided, that the
foregoing Investment is in the form of a note that the Receivables Subsidiary
or other person is required to repay as soon as practicable from available

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cash collections less amounts required to be established as reserves pursuant
to contractual arrangements with entities that are not Affiliates entered into
as part of a Qualified Receivables Transaction;

(7) loans and advances to employees and officers of the Company and its
Subsidiaries in the ordinary course of business for bona fide business purposes
not in excess of $1.5 million at any one time outstanding;

(8) Currency Agreements and Interest Swap and Hedging Obligations entered
into in the ordinary course of the Company's or its Subsidiaries' businesses
and otherwise in compliance with the indenture;

(9) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;

(10) Investments made by the Company or its Subsidiaries as a result of
consideration received in connection with an Asset Sale made in compliance with
the "Limitation on Sale of Assets and Subsidiary Stock" covenant;

(11) Investments by the Company or any Guarantor in a Foreign Subsidiary in
the aggregate not in excess of $5.0 million plus to the extent that any
Investment (other than an Investment which when made was not deducted in this
clause (11)) that was made after the Issue Date is sold for cash or Cash
Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, the
lesser of

(a) the cash or Cash Equivalents return of capital with respect to such
Investment (less the cost of disposition, if any) and

(b) the initial amount of such Investment; and

(12) any Investment in the Company or in a Wholly-Owned Subsidiary Guarantor.

"Permitted Lien" means

(1) Liens existing on the Issue Date;

(2) Liens imposed by governmental authorities for taxes, assessments or other
charges not yet subject to penalty or which are being contested in good faith
and by appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP;

(3) statutory liens of carriers, warehousemen, mechanics, material men,
landlords, repairmen or other like Liens arising by operation of law in the
ordinary course of business provided, that,

(a) the underlying obligations are not overdue for a period of more than 30
days, or

(b) such Liens are being contested in good faith and by appropriate
proceedings and adequate reserves with respect thereto are maintained on
the books of the Company in accordance with GAAP;

(4) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;

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(5) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as
such property is used by the Company or any of its Subsidiaries) or interfere
with the ordinary conduct of the business of the Company or any of its
Subsidiaries;

(6) Liens arising by operation of law in connection with judgments, only to
the extent, for an amount and for a period not resulting in an Event of Default
with respect thereto;

(7) pledges or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security legislation;

(8) Liens securing the notes;

(9) Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged with or into the Company or a Subsidiary or
Liens securing Indebtedness incurred in connection with an Acquisition,
provided, that such Liens

(a) were in existence prior to the date of such acquisition, merger or
consolidation,

(b) were not incurred in anticipation thereof, and

(10) Liens arising from Purchase Money Indebtedness permitted to be incurred
pursuant to clause (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" provided, such Liens relate solely
to the property which is subject to such Purchase Money Indebtedness;

(11) leases or subleases granted to other persons in the ordinary course of
business not materially interfering with the conduct of the business of the
Company or any of its Subsidiaries or materially detracting from the value of
the relative assets of the Company or any Subsidiary;

(12) Liens arising from precautionary Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Company or any
of its Subsidiaries in the ordinary course of business;

(13) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
holders of the notes than the terms of the Liens securing such refinanced
Indebtedness, and provided, that the Indebtedness secured is not increased and
the lien is not extended to any additional assets or property that would not
have been security for the Indebtedness refinanced;

(14) Liens securing Senior Debt incurred in accordance with the terms of the
indenture; and

(15) Liens on assets of a Receivables Subsidiary incurred in connection with
a Qualified Receivables Transaction.

"Permitted Payments to Parent" means without duplication as to amounts,

(1) payments to Parent in an amount sufficient to permit Parent to pay
reasonable and necessary accounting, legal and administrative expenses of the
Parent, not in excess of $350,000 in the aggregate during any consecutive 12-
month period and

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(2) payment to Parent to enable Parent to pay foreign, federal, state or
local tax liabilities ("Tax Payment"), not to exceed the amount of any tax
liabilities that would be otherwise payable by the Company and its Subsidiaries
and Unrestricted Subsidiaries to the appropriate taxing authorities if each of
the Company, such Subsidiaries and Unrestricted Subsidiaries filed a separate
tax return, to the extent that Parent has an obligation to pay such tax
liabilities relating to the operations, assets or capital of the Company or its
Subsidiaries and Unrestricted Subsidiaries;

provided however, that

(1) notwithstanding the foregoing, in the case of determining the amount of a
Tax Payment that is permitted to be paid by Company and any of its United
States Subsidiaries in respect of their Federal income tax liability, such
payment shall be determined assuming that Company is the parent company of an
affiliated group (the "Company Affiliated Group") filing a consolidated Federal
income tax return and that Parent and each such United States subsidiary is a
member of the Company Affiliated Group; and

(2) any Tax Payments shall either be used by Parent to pay such tax
liabilities within 90 days of Parent's receipt of such payment or refunded to
the payee.

"Public Equity Offering" means an underwritten offering of common stock of
the Company for cash pursuant to an effective registration statement under the
Securities Act.

"Purchase Money Indebtedness" of any person means any Indebtedness of such
person to any seller or other person incurred solely to finance the acquisition
(including in the case of a Capitalized Lease Obligation, the lease) of any
after-acquired real or personal tangible property which, in the reasonable good
faith judgment of the Board of Directors of the Company, is directly related to
a Related Business of the Company and which is incurred concurrently with such
acquisition and is secured only by the assets so financed.

"Qualified Capital Stock" means any Capital Stock of the Company that is not
Disqualified Capital Stock.

"Qualified Exchange" means any legal defeasance, redemption, retirement,
repurchase or other acquisition of Capital Stock or Indebtedness of the Company
on or after the Issue Date with the Net Cash Proceeds received by the Company
from the substantially concurrent sale of Qualified Capital Stock or a Capital
Contribution or any exchange of Qualified Capital Stock for any Capital Stock
or Indebtedness of the Company or Capital Stock of the Parent on or after the
Issue Date.

"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company, any Guarantor or any
Receivables Subsidiary pursuant to which the Company, any Guarantor or any
Receivables Subsidiary may sell, convey or otherwise transfer to, or grant a
security interest in for the benefit of,

(1) a Receivables Subsidiary (in the case of a transfer or encumbrancing by
the Company or any Guarantor) and

(2) any other person (solely in the case of a transfer or encumbrancing by a
Receivables Subsidiary),

solely accounts receivable (whether now existing or arising in the future) of
the Company or any Guarantor which arose in the ordinary course of business of
the Company or any Guarantor, and any

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assets related thereto, including, without limitation, all collateral securing
such accounts receivable, all contracts and all guarantees or other obligations
in respect of such accounts receivable, proceeds of such accounts receivable
and other assets which are customarily transferred or in respect of which
security interests are customarily granted in connection with asset
securitization transactions involving accounts receivable.

"Receivables Subsidiary" means a Wholly-Owned Subsidiary of the Company which
engages in no activities other than in connection with the financing of
accounts receivable and which is designated by the Board of Directors of the
Company (as provided below) as a Receivables Subsidiary.

(1) no portion of any Indebtedness or any other obligations (contingent or
otherwise) of which, directly or indirectly, contingently or otherwise,

(a) is guaranteed by the Company or any other Subsidiary of the Company
(excluding guarantees of obligations (other than the principal of, and
interest on, Indebtedness) pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business
in connection with a Qualified Receivables Transaction),

(b) is recourse to or obligates the Company or any other Subsidiary of
the Company in any way other than pursuant to representations, warranties,
covenants and indemnities entered into in the ordinary course of business
in connection with a Qualified Receivables Transaction, or

(c) subjects any property or asset of the Company or any other Subsidiary
of the Company to the satisfaction thereof, other than pursuant to
representations, warranties, covenants and indemnities entered into in the
ordinary course of business in connection with a Qualified Receivables
Transaction,

(2) with which neither the Company nor any other Subsidiary of the Company
has any material contract, agreement, arrangement or understanding other than
those customarily entered into in connection with Qualified Receivables
Transactions, and

(3) with which neither the Company nor any other Subsidiaries of the Company
has any obligation, directly or indirectly, contingently or otherwise, to
maintain or preserve such Subsidiary's financial condition or cause such
Subsidiary to achieve certain levels of operating results.

Any such designation by the Board of Directors of the Company shall be
evidenced to the trustee by filing with the trustee a certified copy of the
resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.

"Reference Period" with regard to any person means the four full fiscal
quarters (or such lesser period during which such person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the notes or the indenture.

"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not

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to exceed (after deduction of reasonable and customary fees and expenses
incurred in connection with the Refinancing plus the amount of any premium paid
in connection with such Refinancing in accordance with the terms of the
documents governing the Indebtedness refinanced without giving effect to any
modification thereof made in connection with or in contemplation of such
refinancing) the lesser of

(1) the principal amount or, in the case of Disqualified Capital Stock,
liquidation preference, of the Indebtedness or Disqualified Capital Stock so
Refinanced and

(2) if such Indebtedness being Refinanced was issued with an original issue
discount, the accreted value thereof (as determined in accordance with GAAP) at
the time of such Refinancing;

provided, that,

(1) such Refinancing Indebtedness shall only be used to Refinance outstanding
Indebtedness or Disqualified Capital Stock of such person issuing such
Refinancing Indebtedness,

(2) such Refinancing Indebtedness shall (x) not have an Average Life shorter
than the Indebtedness or Disqualified Capital Stock to be so refinanced at the
time of such Refinancing and (y) in all respects, be no less subordinated or
junior, if applicable, to the rights of holders of the notes than was the
Indebtedness or Disqualified Capital Stock to be refinanced,

(3) such Refinancing Indebtedness shall have a final stated maturity or
redemption date, as applicable, no earlier than the final stated maturity or
redemption date, as applicable, of the Indebtedness or Disqualified Capital
Stock to be so refinanced, and

(4) such Refinancing Indebtedness shall be secured (if secured) in a manner
no more adverse to the holders of the notes than the terms of the Liens (if
any) securing such refinanced Indebtedness, including, without limitation, the
amount of Indebtedness secured shall not be increased.

"Related Business" means the business conducted (or proposed to be conducted)
by the Company and its Subsidiaries as of the Issue Date and any and all
businesses that in the good faith judgment of the Board of Directors of the
Company are reasonably related businesses.

"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than other Permitted Investments.

"Restricted Payment" means, with respect to any person,

(1) the declaration or payment of any dividend or other distribution in
respect of Equity Interests of such person or any parent or Subsidiary of such
person,

(2) any payment on account of the purchase, redemption or other acquisition
or retirement for value of Equity Interests of such person or any Subsidiary or
parent of such person,

(3) other than with the proceeds from the substantially concurrent sale of,
or in exchange for, Refinancing Indebtedness any purchase, redemption, or other
acquisition or retirement for value of, any payment in respect of any amendment
of the terms of or any defeasance of, any Subordinated Indebtedness, directly
or indirectly, by such person or a parent or Subsidiary of such person prior to
the scheduled maturity, any scheduled repayment of principal, or scheduled
sinking fund payment, as the case may be, of such Indebtedness and

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(4) any Restricted Investment by such person;

provided, however, that the term "Restricted Payment" does not include

(1) any dividend, distribution or other payment on or with respect to Equity
Interests of an issuer to the extent payable solely in shares of Qualified
Capital Stock of such issuer;

(2) any dividend, distribution or other payment to the Company, or to any of
its Subsidiary Guarantors, by the Company or any of its Subsidiaries; or

(3) Permitted Investments.

"Senior Debt" of the Company or any Guarantor means

(1) Indebtedness (including any interest, whether or not allowable, accruing
on Indebtedness incurred pursuant to the Credit Agreement after the filing of a
petition initiating any proceeding under any bankruptcy, insolvency or similar
law) of the Company or such Guarantor arising under the Credit Agreement or
that, by the terms of the instrument creating or evidencing such Indebtedness,
is not expressly designated Subordinated Indebtedness or pari passu
Indebtedness with the notes and made subordinated or pari passu in right of
payment to the notes or the applicable Guarantee and

(2) all other amounts due on or in connection with such Indebtedness,
including all interest, premiums, reimbursement obligations, charges, fees,
indemnities and expenses (including fees and expenses of counsel);

provided, that in no event shall Senior Debt include:

(1) Indebtedness to any Subsidiary of the Company or any officer, director or
employee of the Company or any Subsidiary of the Company,

(2) Indebtedness incurred in violation of the terms of the indenture,

(3) Indebtedness to trade creditors,

(4) Disqualified Capital Stock,

(5) Capitalized Lease Obligations, and

(6) any liability for taxes owed or owing by the Company or such Guarantor.

"Significant Subsidiary" shall have the meaning provided under Regulation S-X
of the Securities Act, as in effect on the Issue Date.

"Stated Maturity," when used with respect to any note, means August 1, 2005.

"Stone Acquisition" means the acquisition by City Truck and Trailer Parts,
Inc. of substantially all of the assets of Stone Heavy Duty, Inc. on June 19,
1998.

"Subordinated Indebtedness" means Indebtedness of the Company or a Guarantor
that is subordinated in right of payment by its terms or the terms of any
document or instrument relating thereto to the notes or such Guarantee, as
applicable, in any respect or has a stated maturity on (except for the notes)
or after the Stated Maturity.

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"Subsidiary," with respect to any person, means

(1) a corporation a majority of whose Equity Interests with voting power,
under ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such person, by such person and one or more Subsidiaries
of such person or by one or more Subsidiaries of such person,

(2) any other person (other than a corporation) in which such person, one or
more Subsidiaries of such person, or such person and one or more Subsidiaries
of such person, directly or indirectly, at the date of determination thereof
has at least majority ownership interest, or

(3) a partnership in which such person or a Subsidiary of such person is, at
the time, a general partner and in which such person, directly or indirectly,
at the date of determination thereof has at least a majority ownership
interest.

Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be a
Subsidiary of the Company or of any Subsidiary of the Company. Unless the
context requires otherwise, Subsidiary includes, without limitation, each
direct and indirect Subsidiary of the Company.

"Unrestricted Subsidiary" means any subsidiary of the Company that does not
own any Capital Stock of, or own or hold any Lien on any property of, the
Company or any other Subsidiary of the Company and that, at the time of
determination, shall be an Unrestricted Subsidiary (as designated by the Board
of Directors of the Company); provided, that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Indebtedness;

(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company;

(3) is a Person with respect to which neither the Company nor any of its
Subsidiaries has any direct or indirect obligation (x) to subscribe for
additional Equity Interests or (y) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and

(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Subsidiaries.

The Board of Directors of the Company may designate any Unrestricted Subsidiary
to be a Subsidiary, provided, that,

(1) no Default or Event of Default is existing or will occur as a consequence
thereof and

(2) immediately after giving effect to such designation, on a pro forma
basis, the Company could incur at least $1.00 of Indebtedness pursuant to the
Debt Incurrence Ratio of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock."

Each such designation shall be evidenced by filing with the trustee a certified
copy of the resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions.

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"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.

"Voting Power" with respect to any Person means the power of all classes of
Capital Stock of such Person then outstanding normally entitled to vote in
elections of directors.

"Wholly-Owned Subsidiary" means a Subsidiary at least 99% of the Equity
Interests of which are owned by the Company or one or more Wholly-Owned
Subsidiaries of the Company.

Book-Entry; Delivery; Form and Transfer

The notes sold to Qualified Institutional Buyers initially will be in the
form of one or more registered global notes without interest coupons. We refer
to these notes as the "U.S. global notes". On issuance, the U.S. global notes
will be deposited with the trustee, as custodian for DTC in New York, New York,
and registered in the name of DTC or its nominee for credit to the accounts of
DTC's direct and indirect participants, as defined below. The notes offered and
sold in offshore transactions in reliance on Regulation S, if any, initially
will be in the form of one or more temporary, registered, global book-entry
notes without interest coupons. We refer to these notes as the "Reg S temporary
global notes". The Reg S temporary global notes will be deposited with the
trustee, as custodian for DTC, in New York, New York, and registered in the
name of a nominee of DTC for credit to the accounts of indirect participants
participating in DTC through the Euroclear System and Cedel Bank, Societe
Anonyme. During the 40-day period commencing on the day after the later of the
offering date and the original issue date of the notes, the "distribution
compliance period", beneficial interests in the Reg S temporary global notes
may be held only through Euroclear or CEDEL, and, pursuant to DTC's procedures,
indirect participants that hold a beneficial interest in the Reg S temporary
global notes will not be able to transfer that interest to a person that takes
delivery in the form of an interest in the U.S. global notes. Within a
reasonable time after the expiration of the distribution compliance period, the
Reg S temporary global notes will be exchanged for one or more permanent global
notes upon delivery to DTC of certification of compliance with the transfer
restrictions applicable to the notes and pursuant to Regulation S as provided
in the indenture. After the distribution compliance period;

(1) beneficial interests in the Reg S permanent global notes may be
transferred to a person that takes delivery in the form of an interest
in the U.S. global notes; and

(2) beneficial interests in the U.S. global notes may be transferred to a
person that takes delivery in the form of an interest in the Reg S
permanent global notes,

provided, in each case, that the certification requirements described below are
complied with. For a more detailed description of the requirements, see
"Transfers of Interests in One Global Note for Interests in Another Global
Note." All registered global notes are referred to in this prospectus
collectively as "global notes."

Beneficial interests in all global notes and all certificated notes, as
defined below, if any, will be subject to restrictions on transfer and will
bear a restrictive legend as described in section 2.6(g) of the indenture. In
addition, transfer of beneficial interests in any global notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants including, if applicable, those of Euroclear and CEDEL, which may
change from time to time.

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The global notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in limited
circumstances. Beneficial interests in the global notes may be exchanged for
notes in certificated form in limited circumstances. For a more detailed
description of the requirements, see "Transfer of Interests in Global Notes for
Certificated Notes."

Initially, the trustee will act as paying agent and registrar. The notes may
be presented for registration of transfer and exchange at the offices of the
registrar.

Depository Procedures

DTC has advised HDA that DTC is a limited-purpose trust company created to
hold securities for its participating organizations, which we refer to as the
"direct participants," and to facilitate the clearance and settlement of
transactions in those securities between direct participants through electronic
book-entry changes in accounts of participants. The direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, including Euroclear and CEDEL. Access to DTC's
system is also available to other entities that clear through or maintain a
direct or indirect, custodial relationship with a direct participant, which we
refer to as the "indirect participants".

DTC has also advised HDA that, pursuant to DTC's procedures:

(1) upon deposit of the global notes, DTC will credit the accounts of the
direct participants designated by the initial purchasers with portions of the
principal amount of the global notes that have been allocated to them by the
initial purchasers: and

(2) DTC will maintain records of the ownership interests of those direct
participants in the global notes and the transfer of ownership interests by and
between direct participants.

DTC will not maintain records of the ownership interests of, or the transfer
of ownership interests by and between, indirect participants or other owners of
beneficial interests in the global notes. Direct participants and indirect
participants must maintain their own records of the ownership interests of, and
the transfer of ownership interests by and between, indirect participants and
other owners of beneficial interests in the global notes.

Investors in the U.S. global notes may hold their interests in those notes
directly through DTC if they are direct participants in DTC or indirectly
through organizations that are direct participants in DTC. Investors in the Reg
S temporary global notes may hold their interests in those notes directly
through Euroclear or CEDEL or indirectly through organizations that are
participants in Euroclear or CEDEL. After the expiration of the distribution
compliance period, investors may hold interests in the Reg S global notes
through organizations other than Euroclear and CEDEL that are direct
participants in the DTC system. Morgan Guaranty Trust Company of New York,
Brussels office, is the operator and depository of Euroclear and Citibank, N.A.
is the operator and depository of CEDEL, each a "nominee" of Euroclear and
CEDEL, respectively. Therefore, they will each be recorded on DTC's records as
the holders of all ownership interests held by them on behalf of Euroclear and
CEDEL, respectively. Euroclear and CEDEL must maintain on their own records the
ownership interests, and transfers of ownership interests of, by and between
their own customers' securities accounts. DTC will not maintain those records.
All ownership interests in any global notes, including those of customers'
securities accounts held through Euroclear or CEDEL, may be subject to the
procedures and requirements of DTC.

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The laws of some states in the United States may require that persons take
physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in
a global note to those persons. Because DTC can act only on behalf of direct
participants, which in turn act on behalf of indirect participants and others,
the ability of a person having a beneficial interest in a global note to pledge
that interest to persons or entities that are not direct participants in DTC,
or to otherwise take actions in respect of those interests, may be affected by
the lack of physical certificates evidencing those interests. For other
restrictions on the transferability of the notes, see "Reg S Temporary and Reg
S Permanent Global Notes" and "--Transfers of Interests in Global Notes for
Certificated Notes."

Except as described in "Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the global notes will
not have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders of the notes under the indenture for any purpose.

Under the terms of the indenture, HDA, the guarantors and the trustee will
treat the persons in whose names the notes are registered, including notes
represented by global notes, as the owners of those notes for the purpose of
receiving payments and for any and all other purposes whatsoever. Payments in
respect of the principal, premium, liquidated damages, if any, and interest on
global notes registered in the name of DTC or its nominee will be payable by
the trustee to DTC or its nominee as the registered holder under the indenture.
Consequently, neither HDA, the trustee nor any agent of HDA or the trustee has
or will have any responsibility or liability for:

(1) any aspect of DTC's records or any direct participant's or indirect
participant's records relating to or payments made on account of beneficial
ownership interests in the global notes or for maintaining, supervising or
reviewing any of DTC's records or any direct participant's or indirect
participant's records relating to the beneficial ownership interests in any
global note; or

(2) any other matter relating to the actions and practices of DTC or any of
its direct participants or indirect participants.

DTC has advised HDA that its current payment practice with respect to
securities such as the notes is to credit the accounts of the relevant direct
participants with that payment on the payment date in amounts proportionate to
those direct participants' respective ownership interests in the global notes
as shown on DTC's records. Payments by direct participants and indirect
participants to the beneficial owners of the notes will be governed by standing
instructions and customary practices between them and will not be the
responsibility of DTC, the trustee, HDA or the guarantors. Neither HDA, the
guarantors nor the trustee will be liable for any delay by DTC or its direct
participants or indirect participants in identifying the beneficial owners of
the notes, and HDA and the trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the notes for all purposes.

The global notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between direct participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between indirect participants, other than Indirect
Participants that hold an interest in the notes through Euroclear or CEDEL,
that hold an interest through a direct participant will be effected in
accordance with the procedures of that direct participant but generally will
settle in immediately available funds. Transfers between and among indirect
participants that hold interests in the notes through Euroclear and CEDEL will
be effected in the ordinary way in accordance with their respective rules and
operating procedures.

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Subject to compliance with the transfer restrictions applicable to the notes,
cross-market transfers between direct participants in DTC, on the one hand, and
indirect participants that hold interests in the notes through Euroclear or
CEDEL, on the other hand, will be effected by Euroclear's or CEDEL's respective
nominee through DTC in accordance with DTC's rules on behalf of Euroclear or
CEDEL; however, delivery of instructions relating to crossmarket transactions
must be made directly to Euroclear or CEDEL, as the case may be, by the
counterparty in accordance with the rules and procedures of Euroclear or CEDEL
and within their established deadlines. Indirect participants that hold
interest in the notes through Euroclear and CEDEL may not deliver instructions
directly to Euroclear's or CEDEL's nominee. Euroclear or CEDEL will, if the
transaction meets its settlement requirements, deliver instructions to its
respective nominee to deliver or receive interests on Euroclear's or CEDEL's
behalf in the relevant global note in DTC, and make or receive payment in
accordance with normal procedures for same-day fund settlement applicable to
DTC.

Because of time zone differences, the securities accounts of an indirect
participant that holds an interest in the notes through Euroclear or CEDEL
purchasing an interest in a global note from a direct participant in DTC will
be credited, and any such crediting will be reported to Euroclear or CEDEL
during the European business day immediately following the settlement date of
DTC in New York. Although recorded in DTC's accounting records as of DTC's
settlement date in New York, Euroclear and CEDEL customers will not have access
to the cash amount credited to their accounts as a result of a sale of an
interest in Reg S permanent global note to a DTC participant until the European
business day for Euroclear or CEDEL immediately following DTC's settlement
date.

DTC has advised HDA that it will take any action permitted to be taken by a
holder of notes only at the direction of one or more direct participants to
whose account interests in the global notes are credited and only in respect of
that portion of the aggregate principal amount of the notes as to which that
direct participant or direct participants has or have given direction. However,
if there is an event of default under the notes, DTC may, without the direction
of one or more of its direct participants, exchange global notes for legended
notes in certificated form, and to distribute those certificated forms of notes
to its direct participants. For more detail regarding transfer requirements,
see "Transfers of Interests in Global Notes for Certificated Notes."

Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures to
facilitate transfers of interests in the Reg S global notes and in the U.S.
global notes among direct participants, including Euroclear and CEDEL, they are
under no obligation to perform or to continue to perform those procedures, and
those procedures may be discontinued at any time. None of HDA, the guarantors,
the initial purchasers or the trustee shall have any responsibility for the
performance by DTC, Euroclear or CEDEL or their respective direct and indirect
participants of their respective obligations under the rules and procedures
governing any of their operations.

The information in this section concerning DTC, Euroclear and CEDEL and their
book-entry systems has been obtained from sources that HDA believes to be
reliable, but HDA takes no responsibility for the accuracy thereof.

Reg S Temporary and Reg S Permanent Global Notes

An indirect participant who holds an interest in the Reg S temporary global
notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as the case
may be, with a certificate in the form required by the indenture certifying
that those indirect participant is either not a U.S. Person or

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has purchased such interests in a transaction that is exempt from the
registration requirements under the Securities Act, and Euroclear or CEDEL, as
the case may be, must provide to the trustee or the paying agent a certificate
in the form required by the indenture prior to any exchange of those beneficial
interests for beneficial interests in Reg S permanent global notes.

"U.S. Person" means:

(1) any individual resident in the United States;

(2) any partnership or corporation organized or incorporated under the laws
of the United States;

(3) any estate of which an executor or administrator is a U.S. person, other
than an estate governed by foreign law and of which at least one executor or
administrator is a non-U.S. Person who has sole or shared investment discretion
with respect to its assets;

(4) any trust of which any trustee is a U.S. Person, other than a trust of
which at least one trustee is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets and no beneficiary of the
trust, and no settler, if the trust is revocable, is a U.S. Person;

(5) any agency or branch of a foreign entity located in the United States;

(6) any non-discretionary or similar account, other than an estate or trust,
held by a dealer or other fiduciary for the benefit or account of a U.S.
person;

(7) any discretionary or similar account, other than an estate or trust, held
by a dealer or other fiduciary organized, incorporated or resident in the
United States; or

(8) any partnership or corporation organized or incorporated under the laws
of a foreign jurisdiction and formed by a U.S. person principally for the
purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated and owned by "accredited investors"
within the meaning of Rule 501(a) under the Securities Act who are not natural
persons, estates or trusts;

provided, however, that the, "U.S. Person" shall not include:

(1) a branch or agency of a U.S. Person that is located and operating outside
the United States for valid business purposes as a locally regulated branch or
agency engaged in the banking or insurance business;

(2) any employee benefit plan established and administered in accordance with
the law, customary practices and documentation of a foreign country; and

(3) the international organizations set forth in Section 902(o)(7) of
Regulation S under the Securities Act and any other similar international
organizations, and their agencies, affiliates and pension plans.

Transfers of Interests in One Global Note for Interests in Another Global Note

Prior to the expiration of the distribution compliance period, an indirect
participant that holds an interest in the Reg S temporary global note through
Euroclear or CEDEL will not be permitted to transfer its interest to a U.S.
Person who takes delivery in the form of an interest in U.S. global notes.
After the expiration of the distribution compliance period, an indirect
participant that holds an interest in Reg S global notes will be permitted to
transfer its interest to a U.S. Person who takes

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delivery in the form of an interest in U.S. global notes only upon receipt by
the trustee of a written certification from the transferor to the effect that
the transfer is being made in accordance with the restrictions on transfer set
forth in section 2.6(g) of the indenture and set forth in the legend printed on
the Reg S permanent global notes.

Prior to the expiration of the distribution compliance period, a direct or
indirect participant that holds an interest in the U.S. global note will not be
permitted to transfer its interests to any person that takes delivery in the
form of an interest in the Reg S temporary global notes. After the expiration
of the distribution compliance period, a direct or indirect participant that
holds an interest in U.S. global notes may transfer its interests to a person
who takes delivery in the form of an interest in Reg S permanent global notes
only upon receipt by the trustee of a written certification from the transferor
to the effect that the transfer is being made in accordance with Rule 904 of
Regulation S.

Transfers involving an exchange of a beneficial interest in Reg S global
notes for a beneficial interest in U.S. global notes or vice versa will be
effected by DTC by means of an instruction originated by the trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection
with such transfer, appropriate adjustments will be made to reflect a decrease
in the principal amount of the one global note and a corresponding increase in
the principal amount of the other global note, as applicable. Any beneficial
interest in the one global note that is transferred to a person who takes
delivery in the form of the other global note will, upon transfer, cease to be
an interest in such first global note and become an interest in such other
global note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other global note for as long as it remains such an interest.

Transfers of Interests in Global Notes for Certificated Notes

An entire global note may be exchanged for definitive notes in registered,
certificated form without interest coupons the "certificated notes", if:

(1) DTC (x) notifies HDA that it is unwilling or unable to continue as
depository for the global notes and HDA thereupon fails to appoint a successor
depository within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act;

(2) HDA, at its option, notifies the trustee in writing that it elects to
cause the issuance of certificated notes; or

(3) upon the request of the trustee or holders of a majority of the
outstanding principal amount of notes, there shall have occurred and be
continuing a default or an event of default with respect to the notes;

provided that in no event shall the Reg S temporary global security be
exchanged by HDA for certificated notes prior to:

(x) the expiration of the distribution compliance period; and

(y) the receipt by the registrar of any certificates identified by HDA or
its counsel to be required pursuant to Rule 903 or Rule 904 under the
Securities Act.

In any such case, HDA will notify the trustee in writing that, upon surrender
by the direct and indirect participants of their interest in such global note,
certificated notes will be issued to each person that such direct and indirect
participants and DTC identify as being the beneficial owner of the related
notes.

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Beneficial interests in global notes held by any direct or indirect
participant may be exchanged for certificated notes upon request to DTC, by
that direct participant, for itself or on behalf of an Indirect Participant, or
to the trustee in accordance with customary DTC procedures. Certificated notes
delivered in exchange for any beneficial interest in any global notes will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such direct or indirect participant, in accordance with DTC's
customary procedures.

In all cases described herein, such certificated notes will bear the
restrictive legend referred to in section 2.6(g) of the indenture unless HDA
determines otherwise in compliance with applicable law.

Neither HDA, the guarantors nor the trustee will be liable for any delay by
the holder of the global notes or DTC in identifying the beneficial owners of
notes, and HDA and the trustee may conclusively rely on, and will be protected
in relying on, instructions from the holder of the global note or DTC for all
purposes.

Transfers of Certificated Notes for Interests in Global Notes

Certificated notes may be transferred only if the transferor first delivers
to the trustee a written certificate and, if required, an opinion of counsel,
confirming that, in connection with the transfer, it has complied with the
restrictions on transfer described in section 2.6(g) of the indenture.

Same Day Settlement and Payment

The indenture requires that payments in respect of the notes represented by
the global notes be made by wire transfer of immediately available same day
funds to the accounts specified by the holders of interests in those global
notes. With respect to certificated notes, HDA will make all payments of
principal, premium, if any, interest and liquidated damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders of those notes or, if no such account is specified, by mailing a
check to each such holder's registered address. HDA expects that secondary
trading in the certificated notes will also be settled in immediately available
funds.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
OF THE EXCHANGE

The following discussion is the opinion of Latham & Watkins, our counsel, as
to the material federal income tax income consequences expected to result to
you if you exchange your private notes for exchange notes in the exchange
offer. This opinion is based on:

. the facts described in the registration statement of which this
prospectus is a part,

. the Internal Revenue Code of 1986, as amended,

. current, temporary and proposed treasury regulations promulgated under
the Internal Revenue Code,

. the legislative history of the Internal Revenue Code,

. current administrative interpretations and practices of the Internal
Revenue Service, and

. court decisions,

all as of the date of this prospectus. In addition, the administrative
interpretations and practices of the Internal Revenue Service include its
practices and policies as expressed in private letter rulings that are not
binding on the Internal Revenue Service, except with respect to the particular
taxpayers who requested and received those rulings. Future legislation,
treasury regulations, administrative interpretations and practices and/or court
decisions may adversely affect, perhaps retroactively, the tax considerations
contained in this discussion. Any change could apply retroactively to
transactions preceding the date of the change. The tax considerations contained
in this discussion may be challenged by the Internal Revenue Service and may
not be sustained by a court if challenged by the Internal Revenue Service, and
we have not requested, and do not plan to request, any rulings from the
Internal Revenue Service concerning the tax treatment of the exchange of
private notes for the exchange notes.

Certain holders may be subject to special rules not discussed below,
including, without limitation:

. insurance companies;

. financial institutions or broker-dealers;

. tax-exempt organizations;

. stockholders holding securities as part of a conversion transaction, or a
hedge or hedging transaction or as a position in a straddle for tax
purposes;

. foreign corporations or partnerships; and

. persons who are not citizens or residents of the United States.

You should consult your tax advisor as to the particular tax consequences of
exchanging private notes for exchange notes, including the applicability and
effect of any state, local or foreign laws.

The exchange of private notes for exchange notes will be treated as a "non-
event" for federal income tax purposes, because the exchange notes will not be
considered to differ materially in kind or extent from the private notes.
Therefore, no material federal income tax consequences will result to you from
exchanging private notes for exchange notes.

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PLAN OF DISTRIBUTION

Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the exchange notes. Broker-dealers may use this
prospectus, as it may be amended or supplemented from time to time, in
connection with the resale of exchange notes received in exchange for private
notes where the broker-dealer acquired the private notes as a result of market-
making activities or other trading activities. We have agreed that for a period
of up to one year after the expiration date, we will make this prospectus, as
amended or supplemented, available to any broker-dealer that requests it in the
letter of transmittal for use in connection with any such resale.

We will not receive any proceeds from any sale of exchange notes by broker-
dealers or any other persons. Broker-dealers may sell exchange notes received
by broker-dealers for their own account pursuant to the exchange offer from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to the prevailing market prices or negotiated
prices. Broker-dealers may resell exchange notes directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any broker-dealer and/or the purchasers of the
exchange notes. Any broker-dealer that resells exchange notes that were
received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of the exchange notes may
be deemed to be "underwriters" within the meaning of the Securities Act and any
profit on any resale of exchange notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

We have agreed to pay all expenses incident to our performance of, or
compliance with, the registration rights agreement and will indemnify you
against liabilities under the Securities Act.

By its acceptance of the exchange offer, any broker-dealer that receives
exchange notes pursuant to the exchange offer agrees to notify us before using
the prospectus in connection with the sale or transfer of exchange notes. The
broker-dealer further acknowledges and agrees that, upon receipt of notice from
us of the happening of any event which makes any statement in the prospectus
untrue in any material respect or which requires the making of any changes in
the prospectus to make the statements in the prospectus not misleading or which
may impose upon us disclosure obligations that my have a material adverse
effect on us, which notice we agree to deliver promptly to the broker-dealer,
the broker-dealer will suspend use of the prospectus until we have notified the
broker-dealer that delivery of the prospectus may resume and have furnished
copies of any amendment or supplement to the prospectus to the broker-dealer.

LEGAL MATTERS

Latham & Watkins, Los Angeles, California, will pass upon certain legal
matters for us. Partners of Latham & Watkins, members of their families,
related persons and others have an indirect interest in, through a limited
partnership, less than 1% of Holdings' common stock and series A preferred
stock. Those persons do not have the power to vote or dispose of the shares.

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EXPERTS

The consolidated financial statements of (i) City Truck Holdings, Inc. and
Subsidiaries as of December 31, 1997 and 1998 and for each of the three years
in the period ended December 31, 1998, (ii) Associated Brake Supply, Inc. and
Affiliates as of December 26, 1997 and December 31, 1998 and for the years
ended December 27, 1996, December 26, 1997, and December 31, 1998, (iii) Wheels
and Brakes, Inc and Subsidiaries as of January 31, 1998 and 1999 and for each
of the three years in the period ended January 31, 1998 and the combined
financial statements of (i) Stone Heavy Duty, Inc. as of December 31, 1996 and
1997 and at June 19, 1998, and for the years ended December 31, 1996, 1997 and
for the period from January 1, 1998 through June 19, 1998, (ii) Vantage Parts
as of December 31, 1997 and 1998 and for each of the three years in the period
ended December 31, 1998, (iii) Truck and Trailer Parts, Inc. and Affiliate as
of December 31, 1996, 1997 and at September 30, 1998 and for the years ended
December 31, 1996, 1997 and for the nine months in the period ended September
30, 1998, (iv) California Equipment Company and California Equipment Company of
Sacramento as of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998 and the financial statements of (i) Active
Gear, L.L.C. as of December 31, 1997 and 1998 and for the each of the three
years in the period ended December 31, 1998, (ii) Superior Truck & Auto Supply,
Inc. as of December 31, 1997 and 1998 and for each of the three years in the
period ended December 31, 1998, (iv) TBS Incorporated as of December 31, 1997
and 1998 and for each of the three years in the period ended December 31, 1998,
and (v) New England Truck and Auto Service, Inc. as of December 31, 1997 and
1998 and for each of the three years in the period ended December 31, 1998
included in this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers L.L.P., independent accountants, given on the authority
of said firm as experts in auditing and accounting.

The financial statements of Connecticut Driveshaft, Inc., Truckparts, Inc.
and Tisco, Inc. and Tisco of Redding, Inc. appearing in this prospectus have
been audited by McGladrey & Pullen, LLP, independent accountants, to the extent
and for the periods indicated in its respective reports appearing in this
prospectus, and are included in reliance upon such reports and upon the
authority of such firm as experts in accounting and auditing.

The consolidated financial statements of (i) QDSP Holdings, Inc. as of
December 31, 1998 and for the period from July 28, 1998 (date of inception)
through December 31, 1998, (ii) SLM Group, Inc. as of August 7, 1998 and for
the period from April 1, 1998 through August 7, 1998, (iii) CSW Enterprises,
Inc. as of December 31, 1997 and August 7, 1998 and for the years ended
December 31, 1996 and 1997 and for the period from January 1, 1998 through
August 7, 1998, and (iv) Holt Incorporated as of August 7, 1998 and for the
year ended August 7, 1998 and the financial statements of (i) Wheatley Truck
Parts, Inc. as of November 30, 1997 and July 31, 1998 and for the years ended
November 30, 1996 and 1997 and the period from December 1, 1997 through July
31, 1998, (ii) Truck City Parts, Inc. as of December 31, 1997 and July 31, 1998
and for the year ended December 31, 1997 and the period from January 1, 1998
through July 31, 1998, (iii) Automotive Sales Company, Inc. as of December 31,
1997 and July 31, 1998 and for the years ended December 31, 1996 and 1997 and
the period from January 1, 1998 through July 31, 1998, (iv) Sharkey Family
Holdings, Inc. (d/b/a Universal Joint Sales Company) as of December 31, 1997
and July 31, 1998 and for the year ended December 31, 1997 and the period from
January 1, 1998 through July 31, 1998, and (v) Fleetpride, Inc. as of December
31, 1997 and July 31, 1998 and for the years ended December 31, 1996 and 1997
and the period from January 1, 1998 through July 31, 1998 included in this
prospectus have been audited by Ernst & Young LLP, independent auditors, as
stated in their reports appearing herein in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.

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The combined financial statements of SLM Group, Inc. and subsidiaries as of
March 31, 1998 and 1997, and for each of the years in the two-year period ended
March 31, 1998, have been included in this prospectus in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

We are not currently subject to the periodic reporting and other information
requirements of the Exchange Act. We will become subject to the requirements
upon the effectiveness of the registration statement. Pursuant to the
indenture, we have agreed that for so long as the notes remain outstanding, we
will furnish to you (1) annual and quarterly financial statements substantially
equivalent to financial statements that would have been included in reports
filed with the SEC if we were subject to Section 13 or 15(d) of the Exchange
Act and (2) any other information, documents and other reports that we would be
required to filed with the SEC if we were subject to Section 13 or 15(d) of the
Exchange Act. In addition, whether or not required by the rules and regulations
of the SEC, we will also agree to file a copy of all such information and
reports with the SEC for public availability, unless the SEC will not accept
the filing, and make the information available to securities analysts and
prospective investors upon request.

This prospectus constitutes part of a registration statement on Form S-4
filed under the Securities Act with respect to the exchange notes to be issued
in the exchange offer. As permitted by the SEC rules, this prospectus omits
some of the information, exhibits and undertakings included in the registration
statement. You may read and copy the information omitted from this prospectus
but contained in the registration statement, as well as the periodic reports
and other information we file with the SEC, at the public reference facilities
maintained by the SEC in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference facilities. You may also access filed documents at the SEC's
web site at http://www.sec.gov.

Statements contained in this prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance we refer you
to the copy of the contract or document filed as an exhibit to the registration
statement, each such statement being qualified in all respects by such
reference.

127

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INDEX TO FINANCIAL STATEMENTS

We have presented Holdings' historical financial statements instead of ours.
Holdings is our parent company and has no separate operations. Its only asset
is its investment in us and equity in our earnings recorded and it has no
liabilities. Holdings is contingently liable for its guarantee of our debt.
Thus, our separate financial statements are not presented.

[Download Table]

Page
----

City Truck Holdings, Inc. and Subsidiaries
Report of Independent Accountants........................................ F-6
Consolidated Balance Sheets at December 31, 1997 and 1998................ F-7
Consolidated Statements of Income for the Years Ended December 31, 1996,
1997 and 1998........................................................... F-8
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996, 1997 and 1998........................................ F-9
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1997, and 1998.................................................... F-10
Notes to Consolidated Financial Statements............................... F-11
Unaudited City Truck Holdings, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets at June 30, 1999................... F-26
Unaudited Consolidated Income Statement for the Six Months Ended June 30,
1999.................................................................... F-27
Consolidated Statements of Stockholders' Equity for the Six Months Ended
June 30, 1999........................................................... F-28
Unaudited Consolidated Statements of Cash Flow for the Six Months Ended
June 30, 1999 and 1998.................................................. F-29
Notes to Unaudited Consolidated Financial Statements..................... F-30
Stone Heavy Duty, Inc.
Report of Independent Accountants........................................ F-34
Combined Balance Sheets at December 31, 1996, 1997 and at June 19, 1998.. F-35
Combined Statements of Income and Retained Earnings for the Years Ended
December 31, 1996, 1997 and for the period from January 1, 1998 through
June 19, 1998........................................................... F-36
Combined Statements of Cash Flows for the Years Ended December 31, 1996
and 1997 and for the period from January 1, 1998 through June 19, 1998.. F-37
Notes to Combined Financial Statements................................... F-38
Associated Brake Supply, Inc. and Affiliate
Report of Independent Accountants........................................ F-43
Consolidated Balance Sheets at December 26, 1997 and at December 31,
1998.................................................................... F-44
Consolidated Statements of Income for the Years Ended December 27, 1996,
December 26, 1997 and December 31, 1998................................. F-45
Consolidated Statements of Stockholders' Equity for the Years Ended
December 27, 1996, December 26, 1997 and December 31, 1998.............. F-46
Consolidated Statements of Cash Flows for the Years Ended December 27,
1996, December 26, 1997 and December 31, 1998........................... F-47
Notes to Consolidated Financial Statements............................... F-48
Vantage Parts
Report of Independent Accountants........................................ F-55
Combined Balance Sheets at December 31, 1997 and 1998.................... F-56
Combined Statements of Income for the Three Years Ended December 31,
1996, 1997 and 1998..................................................... F-57
Combined Statements of Cash Flows for the Three Years Ended December 31,
1996, 1997, and 1998.................................................... F-58
Notes to Combined Financial Statements................................... F-59
Unaudited Vantage Parts
Unaudited Combined Statement of Income for the Period from January 1,
1999 to May 28, 1999.................................................... F-64
Unaudited Combined Statement of Cash Flows for the Period from January 1,
1999 to May 28, 1999.................................................... F-65
Notes to Unaudited Combined Financial Statements......................... F-66
Truck and Trailer Parts, Inc. and Affiliate
Report of Independent Accountants........................................ F-68
Combined Balance Sheets at December 31, 1996, 1997, and at September 30,
1998.................................................................... F-69

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Combined Statements of Income and Stockholders' Equity for the Years
Ended December 31, 1996 and 1997 and for the nine month period ended
September 30, 1998...................................................... F-70
Combined Statements of Cash Flows for the Years Ended December 31, 1996
and 1997 and for the nine month period ended September 30, 1998......... F-71
Notes to Combined Financial Statements................................... F-72
Connecticut Driveshaft, Inc.
Independent Auditor's Report............................................. F-77
Balance Sheet at September 30, 1998...................................... F-78
Statement of Income for the nine months ended September 30, 1998......... F-79
Statement of Retained Earnings for the nine months ended September 30,
1998.................................................................... F-79
Statement of Cash Flows for the nine months ended September 30, 1998..... F-80
Notes to Financial Statements............................................ F-81
Truckparts, Inc.
Independent Auditor's Report............................................. F-84
Balance Sheets at September 30, 1997 and 1998............................ F-85
Statements of Income for the Years Ended September 30, 1997 and 1998..... F-86
Statements of Retained Earnings for the Years Ended September 30, 1997
and 1998................................................................ F-86
Statements of Cash Flows for the Years Ended September 30, 1997 and
1998.................................................................... F-87
Notes to Financial Statements............................................ F-88
Tisco, Inc. and Tisco of Redding, Inc.
Independent Auditor's Report............................................. F-93
Combined Balance Sheet at September 30, 1998............................. F-94
Combined Statement of Income for the Year Ended September 30, 1998....... F-95
Combined Statement of Stockholders' Equity for the Year Ended September
30, 1998................................................................ F-96
Combined Statement of Cash Flows for the Year Ended September 30, 1998... F-97
Notes to Combined Financial Statements................................... F-98
Unaudited Tisco, Inc. and Tisco of Redding, Inc.
Unaudited Combined Statement of Income for the Three Months Ended
December 31, 1998....................................................... F-102
Unaudited Combined Statement of Cash Flows for the Three Months Ended
December 31, 1998....................................................... F-103
Notes to Unaudited Combined Financial Statements......................... F-104
Active Gear, L.L.C.
Report of Independent Accountants........................................ F-106
Balance Sheets at December 31, 1997 and 1998............................. F-107
Statements of Operations and Members Equity for the Years Ended December
31, 1996, 1997 and 1998................................................. F-108
Statement of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998.................................................................... F-109
Notes to Financial Statements............................................ F-110
Unaudited Active Gear, L.L.C.
Unaudited Statements of Operations and Member's Equity for the Period
from January 1, 1999 to April 20, 1999.................................. F-114
Unaudited Statement of Cash Flows for the Period from January 1, 1999 to
April 20, 1999.......................................................... F-115
Unaudited Notes to Financial Statements.................................. F-116
California Equipment Company and California Equipment Company of
Sacramento
Report of Independent Accountants........................................ F-118
Combined Balance Sheets at December 31, 1997 and 1998.................... F-119
Combined Statements of Income for the Years Ended December 31, 1996, 1997
and 1998................................................................ F-120
Combined Statements of Cash Flows for the Years Ended December 31, 1996,
1997 and 1998........................................................... F-121
Combined Statement of Changes in Stockholders' Equity for the Years Ended
December 31, 1996, 1997 and 1998........................................ F-122
Notes to Combined Financial Statements................................... F-123

F-2

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Page
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Unaudited California Equipment Company and California Equipment Company
of Sacramento
Unaudited Combined Balance Sheet at June 30, 1999........................ F-129
Unaudited Combined Statement of Income for the Six Months Ended June 30,
1999.................................................................... F-130
Unaudited Combined Statement of Cash Flows for the Six Months Ended
June 30, 1999........................................................... F-131
Unaudited Combined Statement of Changes in Stockholders' Equity for the
Period Ended June 30, 1999.............................................. F-132
Notes to Unaudited Combined Financial Statements......................... F-133
Superior Truck & Auto Supply, Inc.
Report of Independent Accountants........................................ F-135
Balance Sheets at December 31, 1997 and 1998............................. F-136
Statements of Income and Retained Earnings for the Years Ended
December 31, 1996, 1997 and 1998........................................ F-137
Statements of Cash Flows for the Years Ended December 31, 1996, 1997, and
1998.................................................................... F-138
Notes to the Financial Statements........................................ F-139
Unaudited Superior Truck & Auto Supply, Inc.
Unaudited Statement of Income for the Period from January 1, 1999 to
June 7, 1999............................................................ F-141
Unaudited Statement of Cash Flows for the Period from January 1, 1999 to
June 7, 1999 ........................................................... F-142
Notes to the Unaudited Financial Statements.............................. F-143
Wheels and Brakes, Inc. and Subsidiaries
Report of Independent Accountants........................................ F-145
Consolidated Balance Sheets at January 31, 1998 and 1999................. F-146
Consolidated Statements of Income for the Years Ended January 31, 1997,
1998 and 1999........................................................... F-147
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended January 31, 1997, 1998, and 1999.................................. F-148
Consolidated Statements of Cash Flows for the Years Ended January 31,
1997, 1998, and 1999.................................................... F-149
Notes to Consolidated Financial Statements............................... F-150
Unaudited Wheels and Brakes, Inc., and Subsidiaries
Unaudited Consolidated Balance Sheet at June 30, 1999.................... F-156
Unaudited Consolidated Statement of Income for the Five Months Ended
June 30, 1999........................................................... F-157
Unaudited Consolidated Statement of Changes in Stockholders' Equity for
the Five Months Ended June 30, 1999..................................... F-158
Unaudited Consolidated Statement of Cash Flows for the Five Months Ended
June 30, 1999........................................................... F-159
Notes to Unaudited Consolidated Financial Statements..................... F-160
QDSP Holdings, Inc.
Report of Independent Auditors........................................... F-162
Consolidated Balance Sheet at December 31, 1998.......................... F-163
Consolidated Statement of Operations for the Period from July 28, 1998
(date of inception) to December 31, 1998................................ F-164
Consolidated Statement of Stockholders' Equity for the Period from
July 28, 1998 (date of inception) to December 31, 1998.................. F-165
Consolidated Statement of Cash Flows for the Period from July 28, 1998
(date of inception) to December 31, 1998................................ F-166
Notes to Consolidated Financial Statements............................... F-167
Supplemental Information:
Consolidating Balance Sheet at December 31, 1998......................... F-178
Consolidating Statement of Operations for the Period from July 28, 1998
(date of inception) to December 31, 1998................................ F-179
Unaudited QDSP Holdings, Inc.
Unaudited Consolidated Balance Sheet at June 30, 1999.................... F-180
Unaudited Consolidated Statement of Operations for the Six Months Ended
June 30, 1999........................................................... F-181
Unaudited Consolidated Statement of Stockholders' Equity for the Six
Months Ended June 30, 1999.............................................. F-182
Unaudited Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 1999........................................................... F-183
Notes to Unaudited Consolidated Financial Statements..................... F-184

F-3

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SLM Group, Inc. and Subsidiaries
Report of Independent Auditors.......................................... F-188
Consolidated Balance Sheet at August 7, 1998............................ F-189
Consolidated Statement of Income for the Period from April 1, 1998 to
August 7, 1998......................................................... F-190
Consolidated Statement of Stockholders' Equity for the Period from April
1, 1998 to August 7, 1998.............................................. F-191
Consolidated Statement of Cash Flows from April 1, 1998 to August 7,
1998................................................................... F-192
Notes to Consolidated Financial Statements.............................. F-193
SLM Group, Inc. and Subsidiaries
Independent Auditors' Report............................................ F-199
Combined Balance Sheets at March 31, 1997 and 1998...................... F-200
Combined Statements of Income and Retained Earnings for the Years Ended
March 31, 1998 and 1997................................................ F-201
Combined Statements of Cash Flows for the Years Ended March 31, 1998 and
1997................................................................... F-202
Notes to Combined Financial Statements.................................. F-203
Wheatley Truck Parts, Inc.
Report of Independent Auditors.......................................... F-210
Balance Sheets at November 30, 1997 and July 31, 1998................... F-211
Statements of Income and Retained Earnings for the Years Ended November
30, 1996 and 1997 and the Period from December 1, 1997 to July 31,
1998................................................................... F-212
Statements of Cash Flows for the Years Ended November 30, 1996 and 1997
and the Period from December 1, 1997 to July 31, 1998.................. F-213
Notes to Financial Statements........................................... F-214
Truck City Parts, Inc.
Report of Independent Auditors.......................................... F-219
Balance Sheets at December 31, 1997 and July 31, 1998................... F-220
Statements of Income for the Year Ended December 31, 1997 and the Period
from January 1, 1998 to July 31, 1998.................................. F-221
Statements of Stockholders' Equity for the Year Ended December 31, 1997
and the Period from January 1, 1998 to July 31, 1998................... F-222
Statements of Cash Flows for the Year Ended December 31, 1997 and the
Period from January 1, 1998 to July 31, 1998........................... F-223
Notes to Financial Statements........................................... F-224
Automotive Sales Company, Inc.
Report of Independent Auditors.......................................... F-230
Balance Sheets at December 31, 1997 and July 31, 1998................... F-231
Statements of Income and Retained Earnings for the Years Ended December
31, 1996 and 1997 and the Period from January 1, 1998 to July 31,
1998................................................................... F-232
Statements of Cash Flows for the Years Ended December 31, 1996 and 1997
and the Period from January 1, 1998 to July 31, 1998 .................. F-233
Notes to Financial Statements........................................... F-234
CSW Enterprises, Inc.
Report of Independent Auditors.......................................... F-238
Consolidated Balance Sheets at December 31, 1997 and August 7, 1998..... F-239
Consolidated Statements of Income and Retained Earnings for the Years
Ended December 31, 1996 and 1997 and the Period from January 1, 1998 to
August 7, 1998......................................................... F-240
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996 and 1997 and the Period from January 1, 1998 to August 7, 1998.... F-241
Notes to Consolidated Financial Statements.............................. F-242
Holt Incorporated
Report of Independent Auditors.......................................... F-247
Consolidated Balance Sheet at August 7, 1998............................ F-248

F-4

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Page
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Consolidated Statement of Income and Retained Earnings for the Year Ended
August 7, 1998.......................................................... F-249
Consolidated Statement of Cash Flows for the Year Ended August 7, 1998... F-250
Notes to Consolidated Financial Statements............................... F-251
Sharkey Family Holdings, Inc. (d/b/a Universal Joint Sales Company)
Report of Independent Auditors........................................... F-256
Balance Sheets at December 31, 1997 and July 31, 1998.................... F-257
Statements of Income for the Year Ended December 31, 1997 and the Period
from January 1, 1998 to July 31, 1998................................... F-258
Statements of Stockholders' Equity for the Year Ended December 31, 1997
and the Period from January 1, 1998 to July 31, 1998.................... F-259
Statements of Cash Flows for the Year Ended December 31, 1997 and the
Period from January 1, 1998 to July 31, 1998 ........................... F-260
Notes to Financial Statements............................................ F-261
Fleetpride, Inc.
Report of Independent Auditors........................................... F-267
Balance Sheets at December 31, 1997 and July 31, 1998 ................... F-268
Statements of Operations for the Years Ended December 31, 1996 and 1997
and the Period from January 1, 1998 to July 31, 1998.................... F-269
Statements of Stockholders' Equity for the Years Ended December 31, 1996
and 1997 and the Period from January 1, 1998 to July 31, 1998........... F-270
Statements of Cash Flows for the Years Ended December 31, 1996 and 1997
and the Period from January 1, 1998 to July 31, 1998 ................... F-271
Notes to Financial Statements............................................ F-272
TBS Incorporated
Report of Independent Accountants........................................ F-279
Balance Sheets at December 31, 1997 and 1998............................. F-280
Statements of Income and Retained Deficit for the Years Ended December
31, 1996, 1997 and 1998................................................. F-281
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998.................................................................... F-282
Notes to Financial Statements............................................ F-283
New England Truck and Auto Service, Inc.
Report of Independent Accountants........................................ F-287
Balance Sheets at December 31, 1997 and 1998............................. F-288
Statements of Income and Retained Earnings for the Years Ended December
31, 1996, 1997 and 1998................................................. F-289
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998.................................................................... F-290
Notes to Financial Statements............................................ F-291

We have not presented financial statements for Connecticut Driveshaft, Inc.
and Truckparts, Inc. for the period from date of the last fiscal audited period
for each company, September 30, 1998, to the date we acquired those companies.
We acquired Connecticut Driveshaft on November 4, 1998 and Truckparts on
December 19, 1998. Financial statements for those periods are not available.
Management feels it is impractical to prepare the financial statements for
those periods and that they are not meaningful to an assessment of this filing.
Additionally, management hereby represents there were no significant negative
events or trends during those periods.

We have not presented comparative unaudited financial statements for Vantage
Parts, Active Gear, L.L.C., California Equipment Company and California
Equipment Company of Sacramento, Superior Truck & Auto Supply, Inc., Wheels and
Brakes, Inc. and QDSP Holdings, Inc. for the period January 1, 1998 to the date
of acquisition or June 30, 1998. We also have not presented comparative
unaudited financial statements for Tisco, Inc. and Tisco of Redding, Inc. for
the period from October 1, 1997 to December 31, 1997. Management feels it is
impractical to prepare comparative financial statements for those periods and
that they are not meaningful to an assessment of this filing. Additionally,
management hereby represents there were no significant negative events or
trends during those periods.

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
City Truck Holdings, Inc. and Subsidiaries

In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of City Truck
Holdings, Inc. and Subsidiaries (the "Company") at December 31, 1997 and 1998,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule listed in Item 21 of this Form S-4, presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These consolidated
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
March 31, 1999
Chicago, Illinois

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

At December 31, 1997 and 1998
(amounts in thousands, except for share data)

[Download Table]

1997 1998
-------- --------

ASSETS
------
Current assets:
Cash and cash equivalents................................ $ 191 $ 8,328
Trade accounts receivable, less allowance for doubtful
accounts of $13 and $1,149 in 1997 and 1998............. 5,146 18,099
Inventories, net......................................... 15,476 41,453
Prepaid expenses......................................... 254 55
Deferred tax asset....................................... -- 2,588
Current portion of patronage dividend receivable......... 1,751 2,108
Advances to shareholders and employees................... 271 6
-------- --------
Total current assets................................... 23,089 72,637
Property and equipment, net.............................. 9,030 13,613
Deferred financing fees.................................. -- 5,424
Goodwill and other intangibles, net...................... 99 55,496
Deferred tax asset....................................... -- 12,516
Other assets............................................. 985 4,238
-------- --------
Total assets........................................... $ 33,203 $163,924
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Short-term borrowings.................................... $ 2,839 $ --
Line of credit........................................... 677 --
Note payable............................................. 150 161
Current portion of long-term debt........................ 261 --
Accounts payable......................................... 4,694 14,105
Accrued interest......................................... -- 5,217
Accrued liabilities relating to the acquisitions......... -- 2,279
Other accrued liabilities................................ 596 7,488
-------- --------
Total current liabilities.............................. 9,217 29,250
Long-term debt............................................. 3,213 100,000
Line of credit............................................. -- 18,200
Subordinated debt--related parties......................... 8,755 --
Commitments and contingencies
Stockholders' equity:
Series A Preferred Stock, liquidation value $100, par
value $.01 per share
Outstanding: none in 1997 and 435,750 shares in 1998.... -- 43,575
Common Stock, par value $1.00 and $.01 per share,
respectively
Outstanding: 938 shares in 1997 and 108,834 in 1998..... 2 1
Additional paid-in capital............................... 518 14,325
Treasury shares.......................................... (810) --
Retained earnings (deficit).............................. 12,308 (41,427)
-------- --------
Total stockholders' equity............................. 12,018 16,474
-------- --------
Total liabilities and stockholders' equity............. $ 33,203 $163,924
======== ========

The accompanying notes are integral part of these consolidated financial
statements.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- ------- --------

Net sales........................................... $52,609 $57,837 $103,295
Cost of sales....................................... 33,283 36,611 65,855
------- ------- --------
Gross profit........................................ 19,326 21,226 37,440
Selling, general, and administrative expenses....... 14,390 16,143 31,030
------- ------- --------
Operating income................................ 4,936 5,083 6,410
Other income (expenses):
Interest expense.................................. (722) (841) (6,519)
Interest income................................... 94 65 624
Other income...................................... 40 58 86
------- ------- --------
Income before income taxes.......................... 4,348 4,365 601
Income tax expense (benefit)........................ 53 93 (687)
------- ------- --------
Net income and comprehensive income................. $ 4,295 $ 4,272 $ 1,288
======= ======= ========
Supplemental pro forma income data:
Pro forma income taxes............................ $ 1,731 $ 1,737 $ 239
------- ------- --------
Pro forma net income.............................. $ 2,617 $ 2,628 $ 362
======= ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-8

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands, except for share data)

[Enlarge/Download Table]

HDA Parts City Truck
City Truck HDA Parts System, Inc. City Truck Holdings,
and Trailer System, Inc. HDA Parts Series B Holdings, Inc. Series A
Parts, Inc. Bridge System, Inc. Preferred Inc. Common Preferred City Truck
Common Stock Securities Common Stock Stock Stock Stock and Trailer
-------------- ------------- -------------- -------------- ------------- ------------- Parts, Inc.
Par Paid In Par Paid in Par Paid In Par Paid In Par Paid In Par Paid in Treasury
Value Capital Value Capital Value Capital Value Capital Value Capital Value Capital Stock
----- ------- ----- ------- ----- ------- ----- ------- ----- ------- ----- ------- -----------

Balance at
January 1,
1996............ $ 2 $493 $-- $ -- $-- $ -- $-- $ -- $-- $ -- $-- $ -- $ (810)
Net Income and
Comprehensive
Income..........
Distribution to
Owners..........
---- ---- ---- ------ ---- ------- ---- ------- ---- ------- ---- ------- --------
Balance at
December 31,
1996............ 2 493 -- -- -- -- -- -- -- -- -- -- (810)
Net Income and
Comprehensive
Income..........
Capital
Contribution.... 25
Distributions to
Owners..........
---- ---- ---- ------ ---- ------- ---- ------- ---- ------- ---- ------- --------
Balance at
December 31,
1997............ 2 518 -- -- -- -- -- -- -- -- -- -- (810)
Distribution to
Owners..........
Stock Repurchase
of City Truck
and Trailer
Parts, Inc. .... (25,821)
Recapitalization.. (2) (518) 1 56 3 24,940 26,631
Recapitalization
Fees and Other..
Creation of
deferred tax
asset for
intangibles..... 14,217
Issuance of
Bridge
Securities...... -- 6,000
Repayment of
Bridge
Securities...... -- (6,000)
Issuance for of
HDA stock for
Acquisition of
Stone Heavy
Stone........... -- 7 -- 2,993
Issuance of HDA
stock........... -- 30 1 10,300
Formation and
Issuance of City
Truck Holdings,
Inc. stock...... (1) (14,310) (4) (38,233) 1 14,310 4 38,233
Issuance for
City Truck
Holdings, Inc.
stock for Truck
and Trailer,
Inc.
Acquisition..... -- 7 -- 2,993
Issuance for
City Truck
Holdings, Inc.
stock
Truckparts, Inc.
Acquisition..... -- 5 -- 1,995
Issuance of City
Truck Holdings,
Inc. stock...... -- 3 -- 350
Net Income and
Comprehensive
Income..........
---- ---- ---- ------ ---- ------- ---- ------- ---- ------- ---- ------- --------
Balance at
December 31,
1998............ $-- $-- $-- $ -- $-- $ -- $-- $ -- $ 1 $14,325 $ 4 $43,571 $ --
==== ==== ==== ====== ==== ======= ==== ======= ==== ======= ==== ======= ========

Retained Total
Earnings Shareholders'
(Deficit) Equity
--------- -------------

Balance at
January 1,
1996............ $ 7,896 $ 7,581
Net Income and
Comprehensive
Income.......... 4,295 4,295
Distribution to
Owners.......... (2,283) (2,283)
--------- -------------
Balance at
December 31,
1996............ 9,908 9,593
Net Income and
Comprehensive
Income.......... 4,272 4,272
Capital
Contribution.... -- 25
Distributions to
Owners.......... (1,872) (1,872)
--------- -------------
Balance at
December 31,
1997............ 12,308 12,018
Distribution to
Owners.......... (1,390) (1,390)
Stock Repurchase
of City Truck
and Trailer
Parts, Inc. .... (25,821)
Recapitalization.. (51,111) --
Recapitalization
Fees and Other.. (2,522) (2,522)
Creation of
deferred tax
asset for
intangibles..... 14,217
Issuance of
Bridge
Securities...... 6,000
Repayment of
Bridge
Securities...... (6,000)
Issuance for of
HDA stock for
Acquisition of
Stone Heavy
Stone........... 3,000
Issuance of HDA
stock........... 10,331
Formation and
Issuance of City
Truck Holdings,
Inc. stock...... --
Issuance for
City Truck
Holdings, Inc.
stock for Truck
and Trailer,
Inc.
Acquisition..... 3,000
Issuance for
City Truck
Holdings, Inc.
stock
Truckparts, Inc.
Acquisition..... 2,000
Issuance of City
Truck Holdings,
Inc. stock...... 353
Net Income and
Comprehensive
Income.......... 1,288 1,288
--------- -------------
Balance at
December 31,
1998............ $(41,427) $16,474
========= =============

F-9

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- -------- --------

Operating Activities:
Net income and comprehensive income............. $ 4,295 $ 4,272 $ 1,288
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 877 1,187 1,752
Amortization.................................. 59 54 863
Gain on sale of property and equipment........ (40) (58) (86)
Changes in operating assets and liabilities
net of effect of acquisitions:
Accounts receivable......................... 278 (910) 40
Patronage dividend receivable............... (375) (387) (868)
Inventories................................. 770 (2,285) (1,366)
Prepaid expenses............................ (139) (89) 299
Advances to shareholders and employees...... (11) (259) 265
Other assets................................ (17) 28 (721)
Accounts payable............................ (349) (499) (1,634)
Accrued liabilities......................... 54 77 7,113
------- -------- --------
Net cash provided by operating activities.. 5,402 1,131 6,945
Investing activities:
Acquisition of property and equipment........... (4,301) (1,627) (1,668)
Proceeds from sale of property and equipment.... 54 98 116
Acquisitions, net of cash acquired.............. -- -- (74,527)
------- -------- --------
Net cash used by investing activities...... (4,247) (1,529) (76,079)
Financing activities:
Short term borrowings........................... (233) 2,412 (4,716)
Proceeds of short term revolving line of
credit......................................... 1,300 10,680 --
Payments of short term revolving line of
credit......................................... (1,600) (10,503) (677)
Proceeds on long term revolving line of credit
(net of fees).................................. -- -- 68,481
Payments on long term revolving line of credit.. -- -- (51,993)
Principal payment of long term debt............. (775) (455) (10,802)
Proceeds from issuance of long term debt (net of
fees).......................................... 2,361 150 95,931
Payments for stock repurchase................... -- -- (25,821)
Payments of recapitalization fees............... -- -- (2,522)
Proceeds from issuance of Preferred Stock....... -- -- 10,651
Proceeds from issuance of Common Stock.......... -- -- 33
Distribution to owners.......................... (2,283) (1,872) (1,294)
Contribution to stockholders' equity............ -- 25 --
------- -------- --------
Net cash used by financing activities...... (1,230) 437 77,271
------- -------- --------
Increase (decrease) in cash and cash
equivalents..................................... (75) 39 8,137
Cash and cash equivalents at beginning of year... 227 152 191
------- -------- --------
Cash and cash equivalents at end of year......... $ 152 $ 191 $ 8,328
======= ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest.......................... $ 620 $ 841 $ 1,214
Cash paid for income taxes...................... 42 77 273
Details of Acquisitions
Fair value of assets and liabilities acquired... $ -- $ -- $ 83,226
Less equity payments............................ -- -- 8,000
------- -------- --------
Cash paid....................................... -- -- 75,226
Less cash acquired.............................. -- -- 699
------- -------- --------
Net cash paid for acquisitions................ $ -- $ -- $ 74,527
======= ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-10

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except for share data)

Note 1--Accounting Policies

Basis of Presentation

The consolidated financial statements are presented on the basis of
accounting principles that are generally accepted in the United States. All
professional standards that are effective as of December 31, 1998 have been
taken into consideration in preparing the financial statements. On June 1,
1998, BABF City Corp. purchased 80% of the outstanding capital stock of City
Truck and Trailer Parts, Inc. At December 31, 1998, this interest had reduced
to 53% as a result of various capital transactions.

Description of the Companies

As of May 29, 1998, City Truck and Trailer Parts of Tennessee, Inc., City
Truck and Trailer Parts of Alabama, Inc., City Truck and Trailer Parts of
Alabama LLC, and City Friction, Inc. were merged into City Truck and Trailer
Parts, Inc., an Alabama Corporation. All of these companies were under common
control. The stockholders of City Truck and Trailer Parts of Tennessee, Inc.,
City Truck and Trailer Parts of Alabama, Inc. and City Friction, Inc. converted
their shares into 498 shares of City Truck and Trailer Parts, Inc., such that
these three companies became wholly owned subsidiaries of City Truck and
Trailer Parts, Inc. The members of City Truck and Trailer Parts of Alabama LLC
contributed all of their equity interest to City Truck and Trailer Parts, Inc.
in exchange for 30 shares of common stock in City Truck and Trailer Parts, Inc.
and as a result became a wholly owned subsidiary. The merger has been accounted
for in a manner similar to a pooling of interests under Accounting Principles
Board Opinion No. 16. Accordingly, all prior period consolidated and combined
financial statements presented have been restated to include the combined
results of operations, financial position and cash flows of these companies as
though they had always been a part of City Truck and Trailer Parts, Inc. These
companies previously followed consistent accounting policies and there were no
adjustments to the book value of their assets and liabilities.

City Transportation, Inc., at net book value $94, a wholly owned subsidiary
of City Truck and Trailer Parts, Inc. was retained by the prior owners. This
has been accounted for as a dividend distribution at net book value on the
statement of stockholders' equity as a distribution to owners.

On June 19, 1998, City Truck and Trailer Parts, Inc. converted its 457 shares
of existing $1 par common stock into 57,227 shares of $0.01 par value common
stock ("HDA stock") and 249,427 shares of $0.01 par 6% preferred stock ("Series
B Preferred Stock").

On July 8, 1998, City Truck and Trailer Parts, Inc. was renamed HDA Parts
System Inc.

On September 30, 1998, City Truck Holdings, Inc., a Delaware corporation, was
formed by the share for share exchange of stock in HDA Parts System, Inc. for
stock in City Truck Holdings, Inc. City Truck Holdings, Inc. is a holding
company which has no operations or debt, except for its guarantee of HDA Parts
System, Inc.

On June 1, 1998, City Truck and Trailer Parts, Inc. issued $6,000 of
redeemable, non-convertible, non-voting preferred stock (the "Bridge
Securities"). In July, 1998, the Bridge Securities were redeemed.

F-11

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

At December 31, 1998, the consolidated financial statements for City Truck
Holdings division include its wholly owned subsidiary HDA Parts System, Inc.
The operations of HDA Parts System, Inc. now include its divisions: the City
Truck and Trailer Parts division, the Stone Heavy Duty division, the
Connecticut Driveshaft division and the Tampa Brake and Supply Co division. In
addition, HDA Parts System, Inc. also includes the operations of its wholly
owned subsidiaries: Truck and Trailer Parts, Inc. and Truckparts, Inc.

Nature of Operations

City Truck and Trailer Parts division is a Birmingham, Alabama based operator
of 17 branch locations, including 13 which provide machine shop services, in
Alabama, Georgia, Kentucky, Mississippi, and Tennessee. City Truck also
operates a remanufacturing business for brake shoes, drivelines, transmissions
and rear axles.

Stone Heavy Duty division based in Raleigh, North Carolina operates 18 branch
locations, including three which provide drive-in service facilities and 14
which provide machine shop services in North Carolina, South Carolina,
Tennessee, Virginia and West Virginia. Stone also operates a remanufacturing
business for brake shoes, drivelines, hydraulic systems, transmissions and rear
axles.

Truck and Trailer Parts, Inc. is an Atlanta-based heavy duty vehicle parts
distributor which operates seven branch locations in Florida, Georgia, North
Carolina, South Carolina and Texas.

Connecticut Drive Shaft division is a distributor of heavy duty vehicle parts
which repairs and rebuilds driveshafts, brake shoes, and brake drums. The
Company operates six locations in Connecticut and Massachusetts.

Truckparts, Inc. is a distributor of heavy duty vehicle parts which operates
four locations in Connecticut.

Tampa Brake and Supply Co. division operates five branches in Florida. Tampa
Brake and Supply Co., Inc. is a distributor of heavy duty vehicle parts and a
provider of brake related services for medium and heavy duty trucks.

Principles of Consolidation

The consolidated financial statements include the accounts of the company and
all subsidiary companies. All material intercompany transactions have been
eliminated in consolidation.

Segment Information

In June 1997, the FASB issued SFAS Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement, effective
for financial statements for fiscal years beginning after December 15, 1997,
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. Based on this criteria, the Company has

F-12

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

determined that it operates in one business segment, that being the
distribution of heavy duty vehicle parts in the United States. Thus, all
information required by SFAS No. 131 is included in the Company's financial
statements. No single customer represented more than 10% of the Company's total
sales in 1998, 1997 and 1996.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consists of highly liquid instruments with original
maturities of three months or less from the date of purchase.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using either the first-in, first-out (FIFO) or average-costs basis.

Property, Plant and Equipment

Property, plant and equipment is carried at cost less accumulated
depreciation and amortization. The Company provides for depreciation and
amortization of property and equipment using the straight-line method over the
following estimated useful lives:

[Download Table]

Classification Depreciation Lives
-------------- ------------------

Buildings and building improvements........ 40 years or the life of the lease
Furniture and fixtures..................... 7 years
Vehicles................................... 6 years
Machinery and equipment.................... 3-8 years

When assets are retired or otherwise disposed of, the assets and related
allowances for depreciation and amortization are eliminated from the accounts
and any resulting gain or loss is reflected in income.

Goodwill and Other Intangibles

Goodwill represents the excess of the purchase cost over the fair value of
net assets acquired in a business and is presented net of accumulated
amortization. Amortization of goodwill is recorded on a straight line basis
over 40 years. Other intangibles are amortized over the useful lives of these
assets which range from 5 to 9 years. When facts and circumstances indicate
impairment, the Company reviews goodwill and other intangibles to assess
recoverability from estimated future results of operations and cash flows.

F-13

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Long-Lived Assets

The Company evaluates its long-lived assets (including goodwill) on an
ongoing basis. Identifiable intangibles are reviewed for impairment wherever
events or changes in circumstances indicate that the carrying amount of the
related asset may be impaired. Whether assets to be held and used are impaired
is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset. If the asset is
determined to be impaired, the loss recognized is measured by the amount by
which the carrying value of the asset exceeds its fair value.

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of a sale or within a specified period. Returned cores are either returned
to the vendor for credit or remanufactured.

Preopening Expense

Expenses associated with the opening of new branch locations are expensed in
the period such costs are incurred.

Income Taxes

Prior to the recapitalization on May 29, 1998, with the exception of
Truckparts, Inc. all of the companies included within these financial
statements, with the consent of its shareholders and members, had elected under
the Internal Revenue Code to be taxed as an S Corporation or a limited
liability company. In lieu of corporate income taxes, the stockholders of an S
corporation and the members of a limited liability company are taxed on their
proportionate share of the Company's taxable income. Therefore, no provision or
liability for federal income taxes had been included in the financial
statements for 1996 and 1997.

Concurrent with the recapitalization, the Company elected to be taxed as a C
corporation and is subject to income taxes on its profits in 1998. The Company
then set up a deferred tax asset of $15,104, increasing paid in capital by
$14,217 and recognized $887 net income. The Company applies an asset and
liability approach to accounting for income taxes. Deferred tax liabilities and
assets are recognized for the expected future tax consequences of temporary
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse. Supplemental pro-forma net income included
on the income statement is calculated by applying an income tax rate of 39.8%
to the historical income before taxes.

Deferred Financing Costs

In connection with establishing a revolving credit facility in June, 1998 and
the private placement of debt in July, 1998 the Company incurred various
financing costs which have been deferred on the Company's balance sheet and are
being amortized over the terms of the agreements.

F-14

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Stock Based Compensation

The Company has elected to follow the disclosure requirements of SFAS No.
123, "Accounting for Stock-Based Compensation" only and continues to account
for stock based compensation under the basis of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees". During 1998, shares
of common stock and shares of preferred stock were issued to certain employees
who purchased the stock at the fair market value at the date of the issue. No
stock options have been authorized or issued during 1998.

Reclassifications

Certain amounts for the years ended December 31, 1996 and 1997 were
reclassified to conform to the current year presentation.

Note 2--Inventories

At December 31, inventories consist of the following:

[Download Table]

1997 1998
------- -------

Parts inventory.............................................. $14,290 $35,959
Cores........................................................ 1,186 5,494
------- -------
$15,476 $41,453
======= =======

Note 3--Property and Equipment

Property and equipment consisted of the following as of December 31:

[Download Table]

1997 1998
------- -------

Land....................................................... $ -- $ 20
Buildings and building improvements........................ 4,668 7,732
Furniture and fixtures..................................... 713 920
Vehicles................................................... 3,796 3,862
Machinery and equipment.................................... 5,694 7,907
Construction in progress................................... 18 --
Less: accumulated depreciation............................. (5,859) (6,828)
------- -------
Net property and equipment................................. $ 9,030 $13,613
======= =======

Note 4--Goodwill and Other Intangibles

At December 31, goodwill and other intangibles consists of:

[Download Table]

1997 1998
----- -------

Goodwill..................................................... $ 24 $54,061
Other intangibles............................................ 252 2,117
Less: accumulated amortization............................... (177) (682)
----- -------
Net goodwill and other intangibles........................... $ 99 $55,496
===== =======

F-15

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Goodwill represents the cost in excess of the fair value of the net assets of
companies acquired in purchase transactions. Other intangibles assets have been
recognized for covenants not to compete and a specific beneficial customer
agreement arising from purchase transactions. The Company has charged $44, $44
and $505 in 1996, 1997 and 1998, respectively, for amortization of goodwill and
other intangibles.

Note 5--Borrowings

Revolving Line of Credit

The Company had a maximum availability of $5.0 million at December 31, 1997
on a line of credit from a bank with interest payable at the 90-day LIBOR
(London Interbank Offered Rate) plus 1.5%. The interest rate at December 31,
1997, was 7.2 %. The Company had pledged as collateral accounts receivable and
inventory. The Company's outstanding balance at December 31, 1997 was $677.

At December 30, 1998, the Company increased its maximum availability to $85.0
million on a revolving line of credit from a bank with interest based on the
LIBOR rate plus applicable margin, at 2.3% or, at the Company's option, several
other common indices. The interest rate at December 31, 1998, was 7.8%. The
Company has pledged all of the Company's assets as collateral. The Company's
outstanding balance at December 31, 1998 was $18.2 million. The revolving line
of credit expires in 2004. The weighted average interest rate on short-term
borrowings outstanding as of December 31, 1997 and 1998 are 7.2% and 7.8%,
respectively.

Senior Subordinated Notes

On July 31, 1998, the Company issued $100.0 million of 12% Senior
subordinated notes (the "Senior Subordinated Notes") due 2005 and received
approximately $96.0 million of proceeds after discounts, commissions and fees.
Interest on these notes is paid semi-annually on February 1, and August 1
commencing February 1, 1999. The Senior Subordinated Notes may be redeemed at
the option of the Company, in whole or in part, at any time on or after August
1, 2002 at the redemption prices set forth in the Indenture, plus accrued and
unpaid interest and liquidated damages, if any, to the date of redemption. In
addition, at any time prior to August 1, 2001, the Company may redeem up to 35%
of the aggregate principal amount of notes originally issued at a redemption
price equal to 112% of the aggregate principal amount thereof, plus accrued and
unpaid interest out of the proceeds of public equity offerings.

In connection with the issuance of the Senior Subordinated Notes, the Company
entered into a registration rights agreement that required it to file a
registration statement by December 28, 1998 and to use its best efforts to
cause the registration to become effective by March 13, 1999. The Company did
not comply with the obligations to file and have a registration statement
declared effective as set forth above. The Company is currently paying the
holders of the notes liquidated damages as set forth in the registration rights
agreements which are not material to the consolidated financial statements.

F-16

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Notes Payable

The Company had a note payable for $1,654 at December 31, 1997 to a finance
company. The interest rate was 5% until 1999, and at prime thereafter. Interest
was payable semi-annually until its maturity in 2005. This note was
collateralized by the Company's equipment. This note was repaid on May 29,
1998, concurrent with the recapitalization.

At December 31, 1997, the Company had certain subordinated notes payable to
stockholders. The interest rate at the applicable federal borrowing rate was
5.5% at December 31, 1997. These notes were collateralized by accounts
receivable and inventory. The principal balances due on these notes were $8,755
on December 31, 1997. This note was repaid on May 29, 1998, concurrent with the
recapitalization.

The Company had a note payable for $1,820 at December 31, 1997 with a bank.
The interest was at LIBOR plus 1.5% (7.18% at December 31, 1997). Interest was
due monthly until its maturity in 2002. This rate was collateralized by
accounts receivable, inventory and leasehold improvements. This note was repaid
on May 29, 1998, concurrent with the recapitalization.

The above debt agreements contain certain covenants that, among other things,
limit the ability of the Company to: (i) pay dividends or make certain other
restricted payments; (ii) incur additional Debt; (iii) encumber or sell assets;
(iv) enter into certain guarantees of Debt; (v) enter into transactions with
affiliates; and (vi) merge or consolidate with any other entity or transfer or
lease all or substantially all of their assets. In addition, under certain
circumstances, the Company will be required to offer to purchase the Senior
Subordinated Notes at a price of 100% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase with the proceeds of
certain assets sales.

Note 6--Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturity of these
items.

The carrying amounts of the debt issued pursuant to the Company's revolving
line of credit agreement approximates fair value because the interest rates
change with market interest rates.

The 12% Senior Subordinated Notes are not actively traded however, the most
recent trade of the Senior Notes prior to December 31, 1998 was at a price of
$90. Using this price of $90, the fair value of these notes at December 31,
1998 would be $90.0 million.

There are no quoted market prices for the 6% Series A Preferred Stock. Each
share of the 6% Series A Preferred Stock has a liquidation value of $100 per
share, plus accrued and unpaid dividends. The total liquidation value of the
Series A Preferred Stock would be $44.9 million at December 31, 1998.

These fair value estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.

F-17

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 7--Acquisitions

The Company has made the following acquisitions during 1998. They have all
been accounted for as a purchase, with the purchase price being allocated to
the fair value of the identified assets and liabilities of the Company with the
excess recorded as goodwill.

On June 19, 1998, City Truck and Trailer Parts, Inc. acquired substantially
all of the assets of Stone Heavy Duty, Inc. for approximately $24.5 million in
cash and $3.0 million in common and preferred stock. The Company has allocated
$11.9 million of the purchase price to the identified assets and liabilities.
The acquisition was accounted for as a purchase and the consolidated financial
statements for the Company include income since the date of acquisition.

On September 30, 1998, the Company acquired all of the capital stock of Truck
and Trailer Parts, Inc. for approximately $18.7 million in cash and $3.0
million in common and preferred stock. The Company has allocated $6.5 million
of the purchase price to the identified assets and liabilities. The acquisition
was accounted for as a purchase and the consolidated financial statements for
the Company include income since the date of acquisition.

On October 30, 1998, the Company acquired substantially all of the assets of
Tampa Brake and Supply Co., Inc. for approximately $9.9 million in cash. The
Company has allocated $4.1 million of the purchase price to the identified
assets and liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

On November 4, 1998, the Company acquired substantially all of the assets of
Connecticut Drive Shaft for approximately $9.9 million in cash. The Company has
allocated $7.4 million of the purchase price to the identified assets and
liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

On December 17, 1998, the Company acquired all of the capital stock of
Truckparts, Inc. for approximately $12.1 million in cash and $2.0 million in
common and preferred stock. The Company recorded approximately $10.8 million in
goodwill. The Company has allocated $3.3 million of the purchase price to the
identified assets and liabilities. The acquisition was accounted for as a
purchase and the consolidated financial statements for the Company include
income since the date of acquisition.

In connection with these acquisitions the Company has recorded aggregate
goodwill of $54.0 million and certain liabilities totaling $4.1 million in
connection with vendor consolidations, the closure of duplicate facilities, and
other activities that will be phased out during 1999.

F-18

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

The following unaudited pro forma financial information combines the results
of operations of City Truck and Trailer Parts, Inc., Stone Heavy Duty Inc.,
Truck and Trailer Parts Inc., Connecticut Drive Shaft Inc., Truckparts, Inc.
and Tampa Brake and Supply Co. Inc., as if the acquisitions had taken place on
January 1, 1997, after giving effect to certain adjustments including:
amortization of goodwill, interest expense and a normal charge for income taxes
assuming all of the companies had operated as "C" corporations for 1997 and
1998.

[Download Table]

1997 1998
------------------ -------------------
Actual Proforma Actual Proforma
------- ---------- -------- ----------
(unaudited) (unaudited)

Net sales......................... $57,837 $176,064 $103,295 $192,850
Net income and comprehensive
income (loss).................... 4,272 (2,779) 1,288 (1,614)

In addition, the Company's subsidiaries, operated throughout the periods
presented as independent, privately owned entities, which influenced the
historical level of owners' compensation and other expenses. Accordingly, the
historical results of operations include (i) historical compensation expenses
in excess of the current compensation levels to the former owners of City Truck
Holdings, Inc. and its subsidiaries; and (ii) certain other private company
expenses.

Note 8--Common Stock

The following are the number of shares outstanding for each of the Company's
classes of common stock as of December 31:

[Enlarge/Download Table]

City Truck and HDA Parts City Truck
Trailer, Parts, Inc. Bridge Systems, Inc. Holdings, Inc.
Common Stock Securities Common Stock Common Stock
(Par value $1) (Par value $.01) (Par value $.01) (Par value $.01)
-------------------- ---------------- ---------------- ----------------

Balance at January 1,
1996................... 938
---- ------- ------- -------
Balance at December 31,
1996................... 938
---- ------- ------- -------
Balance at December 31,
1997................... 938
Stock Repurchase........ (481)
Recapitalization........ (457) 57,227
Issuance of Bridge
Security............... 30,000
Repayment of Bridge
Security............... (30,000)
Issuance for acquisition
of Stone
Heavy Duty, Inc........ 6,867
Issuance to employees
and others............. 30,135
Formation of City Truck
Holdings, Inc.......... (94,229) 94,229
Issuance for acquisition
of Truck and
Trailer Parts, Inc..... 6,867
Issuance for acquisition
of Truckparts, Inc..... 4,578
Issuance to employees... 3,160
---- ------- ------- -------
Balance at December 31,
1998................... 0 0 0 108,834
==== ======= ======= =======

The common stock of City Truck and Trailer Parts, Inc. had a par value of $1
per share, of which 2,000 were authorized, and 1,538 were issued at December
31, 1996 and 1997.

F-19

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

The common stock of City Truck Holdings, Inc. has a par value of $.01 per
share, of which 250,000 are authorized, and 108,834 are issued and outstanding
at December 31, 1998.

Note 9--Preferred Stock

The following are the number of shares issued for each of the Company's
classes of preferred stock as of December 31:

[Download Table]

HDA Parts City Truck
System, Inc. Holding, Inc.
Series B Series A
Preferred Stock Preferred Stock
(Par value $.01) (Par value $.01)
---------------- ----------------

Balance at January 1, 1996.................. 0 0
-------- -------
Balance at December 31, 1996................ 0 0
-------- -------
Balance at December 31, 1997................ 0 0
Recapitalization............................ 249,428
Issuance for acquisition of Stone Heavy
Duty, Inc.................................. 29,931
Issuance to employees and others............ 103,013
Formation of City Truck Holdings, Inc....... (382,372) 382,372
Issuance for acquisition of Truck and
Trailer Parts, Inc......................... 29,931
Issuance for acquisition of Truckparts,
Inc........................................ 19,954
Issuance to employees and others............ 3,493
-------- -------
Balance at December 31, 1998................ 0 435,750
======== =======

The Series A Preferred Stock has a par value of $.01 per share, of which
850,000 are authorized, and 435,750 were issued at December 31, 1998. Each
share of Series A Preferred stock is entitled to one vote per share on all
matters. These shares earn dividends at a rate of 6.0% per annum, payable
quarterly on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1998. Dividends not paid will cumulate whether or not
earned or declared with additional dividends thereon, compounded quarterly at
the rate of 6% per annum. At December 31, 1998, the Company had $1,320
cumulated dividends on these shares.

The Company has no right to redeem any shares of its Series A Preferred Stock
and the holders of the Company's Series A Preferred Stock do not have a right
to require the Company to redeem any of the shares.

Upon liquidation, holders of Series A Preferred Stock are entitled to $100
per share plus accrued and unpaid dividends.

F-20

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 10--HDA Parts System, Inc. Condensed Financial Information

HDA Parts System, Inc. is a wholly owned subsidiary of City Truck Holdings,
Inc. During September 1998, the shares of common stock of HDA Parts System,
Inc. were exchanged for shares of common stock in City Truck Holdings, Inc.

Guarantor subsidiaries were purchased by HDA Parts System, Inc. using, in
part, shares of common stock of City Truck Holdings, Inc. These holdings so
acquired were subsequently contributed to HDA Parts Systems, Inc. and recorded
as an increase to paid-in capital. As the only assets and operations of City
Truck Holdings, Inc. relate to its ownership of the shares of common and
preferred stock in HDA Parts System, Inc., the financial position and results
of operations of City Truck Holdings, Inc. are identical to HDA Parts System,
Inc.

HDA Parts System, Inc.'s payment obligations under the Senior Subordinated
Notes are fully and unconditionally guaranteed on a joint and several basis by
Truckparts, Inc. and Truck and Trailer Parts, Inc. (collectively Guarantor
Subsidiaries). The following consolidating condensed financial information is
listed below:

Consolidating Balance Sheet, At December 31, 1998

[Download Table]

HDA Parts
System, Guarantor Consolidated
Inc. Subsidiaries Eliminations Total
--------- ------------ ------------ ------------

ASSETS

Current assets:
Cash and cash equivalents... $ 7,791 $ 537 $ -- $ 8,328
Accounts receivable, net.... 13,350 4,755 -- 18,105
Inventories................. 33,377 8,076 -- 41,453
Other current assets........ 4,556 195 -- 4,751
-------- ------- -------- --------
Total current assets...... 59,074 13,563 -- 72,637
Property, plant and equipment,
net.......................... 12,705 908 -- 13,613
Investments................... 34,497 -- $(34,497) --
Other long-term assets........ 21,773 405 -- 22,178
Goodwill and other
intangibles.................. 30,844 -- 24,652 55,496
-------- ------- -------- --------
Total assets.............. $158,893 $14,876 $ (9,845) $163,924
======== ======= ======== ========

LIABILITIES AND STOCKHOLDERS'
EQUITY

Current liabilities:
Notes payable............... $ 12 $ 149 $ -- $ 161
Accounts payable............ 10,780 3,325 -- 14,105
Accrued liabilities......... 13,427 1,557 -- 14,984
-------- ------- -------- --------
Total current
liabilities.............. 24,219 5,031 -- 29,250
Revolving credit facility..... 18,200 -- -- 18,200
12% senior subordinated
notes........................ 100,000 -- -- 100,000
-------- ------- -------- --------
Total liabilities......... 142,419 5,031 -- 147,450
-------- ------- -------- --------
Total stockholders'
equity................... 16,474 9,845 (9,845) 16,474
-------- ------- -------- --------
Total liabilities and
stockholders' equity..... $158,893 $14,876 $ (9,845) $163,924
======== ======= ======== ========

F-21

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Consolidated Income Statement, For the Year Ended December 31, 1998

[Download Table]

HDA
Parts
System, Guarantor Consolidated
Inc. Subsidiaries Total
------- ------------ --- ------------

Net sales.............................. $95,089 $8,206 $103,295
Cost of sales.......................... 59,690 6,165 65,855
------- ------ --- --------
Gross profit........................... 35,399 2,041 37,440
Selling, general and administrative
expenses.............................. 29,498 1,532 31,030
------- ------ --- --------
Operating income....................... 5,901 509 6,410
Interest expense....................... 6,519 -- 6,519
Interest (income)...................... (624) -- (624)
Other (income) expense................. (87) 1 (86)
------- ------ --- --------
Income before income taxes............. 93 508 601
Income tax benefit..................... (687) -- (687)
------- ------ --- --------
Net income and comprehensive income.... $ 780 $ 508 $ 1,288
======= ====== === ========

Consolidating Cash Flows, For the Year Ended December 31, 1998

[Download Table]

HDA
Parts
System, Guarantor Consolidated
Inc. Subsidiaries Total
-------- ------------ --- ------------

Net income and comprehensive income... $ 779 $509 $ 1,288
Adjustments to reconcile net income to
net cash provided by operating
activities........................... 5,700 (43) 5,657
-------- ---- --- --------
Cash provided by operating
activities........................... 6,479 466 6,945
Cash (used) provided by investing
activities........................... (76,150) 71 (76,079)
Cash provided by financing
activities........................... 77,271 -- 77,271
-------- ---- --- --------
Net increase in cash.................. 7,600 537 8,137
Cash and cash equivalents at the
beginning of period.................. 191 -- 191
-------- ---- --- --------
Cash and cash equivalents at the end
of period............................ $ 7,791 $537 $ 8,328
======== ==== === ========

Note 11--Employee Benefit Plans

The Company sponsors a number of defined contribution 401(k) plans covering
substantially all of its full-time employees. Employees may contribute up to
15% of their salary to the plan while the company may make discretionary
contributions to it. Total expenses under these plans were $111, $130 and $248
for the years ended December 31 1996, 1997 and 1998, respectively.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 12--Operating Leases

The Company leases office and warehouse space from related parties and third
parties. Rental expense to related parties was $751, $750 and $1,136 in 1996,
1997 and 1998, respectively. The Company also leases office, warehouse space
and transportation equipment from unrelated parties. Rental expense to third
parties was $365, $381 and $494 in 1996, 1997 and 1998, respectively. Minimum
future rental payments under these leases for each of the next five years and
thereafter, and in the aggregate are as follows:

[Download Table]

Year Amount
---- --------

1999............................................................ $ 1,589
2000............................................................ 2,733
2001............................................................ 2,531
2002............................................................ 2,035
2003............................................................ 2,276
Thereafter...................................................... 7,981
--------
$ 19,145
========

Note 13--Related Party Transactions

In addition to the transactions described in the above footnotes, the
following related parties existed at December 31, 1998.

The Company has entered into a Corporate Development and Administrative
Services Agreement with Brentwood Private Equity L.L.C., ("BPE"), an affiliate
of the Company's majority shareholder, Brentwood. Under the terms of the
agreement, BPE has agreed to assist the Company with corporate development
services for a predetermined percentage of certain transactions. In 1998, the
Company incurred $2,208 under the terms of this agreement in connection with
acquisitions made by the Company.

Note 14--Income Taxes

The income tax expense (benefit) for the years ended December 31, consists of
the following:

[Download Table]

1996 1997 1998
---- ---- -----

Current tax expense (benefit)
Fed...................................................... $-- $-- $ --
State.................................................... 53 93 200
Deferred tax expense (benefit)
Fed...................................................... -- -- (751)
State.................................................... -- -- (136)
---- ---- -----
$ 53 $ 93 $(687)
==== ==== =====

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

The provisions for income tax differs from the statutory tax expense computed
by applying the federal corporate tax rate of 34% for the years ended December
31 as follows:

[Download Table]

1996 1997 1998
---- ---- -------

Taxes computed at statutory rate........................ $ 53 $ 93 $ 204
State tax expense, net of federal benefit............... -- -- 42
Income earned while an S corporation.................... -- -- (1,017)
Goodwill amortization and other non-deductible
expenses............................................... -- -- 84
---- ---- -------
Total income tax expense (benefit)...................... $ 53 $ 93 $ (687)
==== ==== =======

The approximate tax effects of the temporary differences between the tax
basis of assets and liabilities and their financial reporting amounts that give
rise to a significant portion of the deferred tax asset and deferred tax
liability are as follows, as of December 31:

[Download Table]

1997 1998
------ -------
Tax Tax
Effect Effect
------ -------

Inventories.................................................. $ -- $ 619
Accrued liabilities.......................................... -- 167
Recapitalization............................................. -- 14,217
Net operating loss carryforwards............................. -- 301
----- -------
Total deferred tax asset..................................... -- 15,304
Goodwill and other intangibles liabilities................... -- (200)
----- -------
Total deferred tax liability................................. -- --
----- -------
Net deferred tax asset....................................... $ -- $15,104
===== =======

The acquisition of the Company's stock by BABF City Corp. resulted in a step-
up in the tax basis of the Company's net assets of $37,413. This amount will be
amortized over 15 years for tax purposes, resulting in a deferred tax asset of
$14,217. Pursuant to SFAS 109, the Company's contributed capital has been
increased by the amount of this tax benefit.

Net operating loss carryforwards for tax purposes of $2,109 at December 31,
1998, will begin expiring in 2018.

Note 15--Stock Plans

During 1998, the Company had two types of employee stock plans. Under the
terms of these plans, certain members of the Company's management purchased
10,150 shares of common stock at a value of $1.00 per share with forfeiture
restrictions expiring after eight years. As all common stock shares were
purchased by the Company's management at fair value and management paid for
these shares in cash, no compensation expense was recorded. The fair value was
based on the price paid by private investors and the value of the equity
instruments issued in purchase business combinations at the same time the
shares were purchased by management.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 16--Subsequent Events

In connection with the acquisitions the Company intends to record certain
liabilities totaling $1.4 million in connection with vendor consolidations, the
closure of duplicate facilities, and other activities that will be phased out
during 1999 and 2000.

On February 5, 1999 and January 25, 1999, the Company signed non-binding
letters of intent to acquire Vantage Parts and Active Gear, L.L.C.,
respectively. Vantage Parts is based in Portland, Oregon and Active Gear,
L.L.C. is based in Seattle, Washington. These companies have a total of nine
locations in California, Georgia, Illinois, Missouri, Nevada, Oregon and
Washington.

On January 11, 1999, the Company completed an additional issuance of common
and preferred stock. The Company issued 17,332 shares of common stock and
received proceeds of $2.9 million net of offering costs. The Company also
issued 75,538 shares of Series A Preferred Stock and received proceeds of $7.6
million. In addition, the Company obtained unconditional commitments for
further common and preferred shares, valued at $42.0 million, which will be
used to complete the acquisitions of Vantage Parts and Active Gear, L.L.C.

The Company anticipates filing a registration statement with the Securities
and Exchange Commission. The Company expects to exchange the $100 million 12%
Senior Subordinated Notes due 2005 for exchange notes of the same form and
terms as the private notes, except that the exchange notes will be registered
under the Securities Act, and, therefore, the exchange notes will not be
subject to certain transfer restrictions, registration rights and certain
provisions providing for an increase in the interest rate of the private notes
under certain circumstances relating to the registration of the exchange notes.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS
At June 30, 1999
(amounts in thousands, except per share data)

[Download Table]

June 30,
1999
--------

ASSETS
Current assets:
Cash and cash equivalents........................................... $ 7,771
Trade accounts receivable, less allowance for doubtful
accounts of $770................................................... 37,744
Inventories, net.................................................... 71,318
Prepaid expenses and other current assets........................... 4,294
Current portion of patronage dividend receivable.................... 2,906
--------
Total current assets.............................................. 124,033
Property and equipment, net........................................... 19,191
Other assets.......................................................... 16,424
Deferred financing fees............................................... 5,835
Goodwill and other intangibles........................................ 122,753
--------
Total assets...................................................... $288,236
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable....................................................... 150
Accounts payable.................................................... 24,515
Accrued liabilities................................................. 17,998
--------
Total current liabilities......................................... 42,663
Line of credit........................................................ 66,750
Long-term debt........................................................ 100,000
--------
Total liabilities................................................. 209,413
Stockholders' equity:
Series A Preferred Stock, liquidation value $100,
par value $.01 per share, Outstanding: 881,420 .................... 88,142
Common stock, par value $.01 per share outstanding:
212,373............................................................ 2
Additional paid-in capital.......................................... 29,848
Employee notes...................................................... (425)
Retained earnings (deficit)......................................... (38,744)
--------
Total stockholders' equity........................................ 78,823
--------
Total liabilities and stockholders' equity........................ $288,236
========

The accompanying notes are an integral part of these consolidated financial
statements.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED INCOME STATEMENT
For the Six Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

Six Months Ended
-----------------
June 30,
-----------------
1999 1998
-------- -------

Net Sales.................................................... $141,530 $33,755
Cost of sales................................................ 91,891 20,832
-------- -------
Gross profit................................................. 49,639 12,923
Selling, general and administrative expenses................. 37,075 9,308
-------- -------
Operating income......................................... 12,564 3,615
Interest expense............................................. 8,283 653
Interest (income) expense.................................. (217) (57)
Other (income) expense..................................... 41 (79)
-------- -------
Income before income taxes................................... 4,457 3,098
Income tax expense........................................... 1,774 292
-------- -------
Net income and comprehensive income.......................... $ 2,683 $ 2,806
======== =======
Supplemental pro forma income data:
Pro forma income taxes..................................... $1,774 $ 1,233
-------- -------
Pro forma net income....................................... $ 2,683 $ 1,865
======== =======

The accompanying notes are an integral part of these consolidated financial
statements.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Six Months Ended June 30, 1999
(amounts in thousands)

[Enlarge/Download Table]

City Truck
Holdings, City Truck
City Truck Inc. Series A and
Holdings, Inc. Preferred Trailer
Common Stock Stock Parts,
---------------- ------------- Inc. Related Total
Par Paid In Par Paid In Treasury Earnings Shareholders'
Value Capital Value Capital Stock (Deficit) Equity
------ --------- ----- ------- ---------- --------- -------------

Balance at December 31,
1998 .................. $ 1 $ 14,325 $ 4 $43,571 $-- $(41,427) $16,474
Issuance for City Truck
Holdings, Inc. stock
for Associated Brake
Supply, Inc.
Acquisition ........... -- 11 1 4,988 5,000
Issuance for City Truck
Holdings, Inc. stock
for Tisco, Inc.
Acquisition ........... -- 2 -- 748 750
Issuance of City Truck
Holdings, Inc. stock .. 1 15,145 4 37,891 53,041
Issuance for City Truck
Holdings, Inc. stock
for Active Gear, L.L.C.
Acquisition............ -- 281 -- 719 1,000
Issuance for City Truck
Holdings, Inc. stock
for Superior Truck &
Auto Supply Acquisition
....................... -- 84 -- 216 300
Promissory notes issued
by employees as
consideration for stock
issued ................ -- (425) -- -- (425)
Net Income and
Comprehensive Income... -- -- -- -- 2,683 2,683
----- --------- --- ------- ---- -------- -------
Balance at June 30, 1998
....................... $ 2 $ 29,423 $ 9 $88,133 $-- $(38,744) $78,823
===== ========= === ======= ==== ======== =======

The accompanying notes are an integral part of these consolidated financial
statements.

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CITY TRUCK HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
For the Six Months Ended June 30, 1999 and 1998
(amounts in thousands)

[Download Table]

For the Six Months
Ended June 30,
-------------------
1999 1998
--------- --------

Operating activities:
Net income and comprehensive income..................... $ 2,683 $ 2,806
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 3,169 647
(Gain) loss on sale of property and equipment......... 30 (35)
Changes in operating assets and liabilities:
Accounts receivable.................................. (5,155) (1,275)
Patronage dividend receivable........................ (2,881) 354
Inventories.......................................... (3,682) (606)
Prepaid expenses..................................... (236) 42
Advances to shareholders and employees............... (115) --
Other assets......................................... 3,899 (1,390)
Accounts payable..................................... 1,903 940
Accrued liabilities.................................. 2,415 (196)
--------- --------
Net cash provided by investing activities........... 2,030 1,287
Investing activities:
Acquisition of property and equipment................... (2,533) (442)
Proceeds from sale of property and equipment............ 78 35
Acquisitions, net of cash acquired...................... (100,640) (23,108)
--------- --------
Net cash used by investing activities............... (103,095) (23,515)
Financing activities:
Short term borrowings................................... -- (3,516)
Net issuance (repurchase) of Bridge Securities.......... -- 6,000
Proceeds from issuance of Preferred Stock............... 49,669 9,503
Proceeds from issuance of Common Stock.................. 2,947 22
Payment on short term revolving line of credit.......... (36,200) (677)
Proceeds from line of credit (net of fees).............. 84,092 50,852
Principal payments of long-term debt.................... -- (10,798)
Payments for stock repurchase........................... -- (25,821)
Payments of recapitalization fees....................... -- (942)
Distribution to owners.................................. -- (1,294)
--------- --------
Net cash provided by financing activities........... 100,508 23,329
--------- --------
Increase (decrease) in cash and cash equivalents.......... (557) 1,101
Cash and cash equivalents at beginning of period.......... 8.328 191
--------- --------
Cash and cash equivalents at end of period................ $ 7,771 $ 1,292
========= ========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................. $ 8,310 $ 48
Cash paid for income taxes.............................. 82 29
Details of Acquisitions
Fair value of assets and liabilities acquired........... $ 108,022 $ 26,108
Less equity payments.................................... 7,050 3,000
--------- --------
Cash paid............................................... 100,972 23,108
Less cash acquired...................................... 332 --
--------- --------
Net cash paid for acquisitions...................... $ 100,640 $ 23,108
========= ========

The accompanying notes are an integral part of these consolidated financial
statements.

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ITEM 1. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1--Accounting Policies

Basis of Presentation

In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of the
results for interim periods. The current period's results of operations are not
necessarily indicative of results that ultimately may be achieved for the year.

Description of Companies and Operations

City Truck Holdings, Inc., a Delaware corporation, was formed by the share
for share exchange of stock in HDA Parts System, Inc. for stock in City Truck
Holdings, Inc. City Truck Holdings, Inc. is a holding company which has no
operations or debt, except for its guarantee of HDA Parts System, Inc., its
wholly owned subsidiary. The historical financial statements for City Truck
Holdings, Inc. are identical to HDA Parts System, Inc. except with respect to
the accounts which comprise the stockholders' equity section for the balance
sheet.

The company operates as an independent distributor of heavy duty vehicle
parts and provider of related services. Operations include the six companies
acquired in 1998 and the operations of Associated Truck Parts, Inc., Tisco,
Inc., Active Gear, L.L.C., Vantage Parts and Superior Truck & Auto Supply, Inc.
since their dates of acquisition.

Segment Information

The Company has determined that it operates in one business segment, that
being the distribution of heavy duty vehicle parts in the United States. No
single customer represented more than 10% of the Company's total sales for the
first six months of 1999 and 1998.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using either the first-in, first-out (FIFO) or average-costs basis.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation and
amortization. The Company provides for depreciation and amortization of
property and equipment using the straight-line method over the following
estimated useful lives:

[Download Table]

Classification Depreciation Lives
-------------- ------------------

Buildings and building improvements 40 years or the life of the lease
Furniture and fixtures 7 years
Vehicles 6 years
Machinery and equipment 3-8 years

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When assets are retired or otherwise disposed of, the assets and related
allowances for depreciation and amortization are eliminated from the accounts
and any resulting gain or loss is reflected in income.

Supplemental Pro Forma Net Income

In 1998, the Company had elected "S" corporation status for federal and state
income tax reporting purposes. Supplemental pro forma net income included on
the income statement is calculated by applying an income tax rate of 39.8% to
the 1998 income before taxes assuming the Company was a "C" corporation.

Note 2--Inventories

Inventories consist of the following:

[Download Table]

June 30,
1999
--------

Purchased parts........................................................ $66,373
Core inventory......................................................... 4,945
-------
$71,318
=======

Note 3--Capital Stock

On January 11, 1999, the Company completed an additional issuance of common
and preferred stock. The Company issued 17,332 shares of common stock and
received proceeds of $2.9 million net of offering costs. The Company also
issued 75,538 shares of Series A Preferred Stock and received proceeds of $7.6
million. On April 6, 1999, the Company issued 69,320 shares of common stock and
received proceeds of $11.8 million. The Company also issued 302,154 shares of
Series A Preferred Stock and received proceeds of $30.2 million.

On March 5, 1999, John J. Greisch, President and Chief Executive Officer,
John P. Miller, Chief Financial Officer and Secretary and Anthony W. Cavalle,
Vice President Operations, purchased 2,000, 250 and 250 shares of the Company's
common stock, respectively, subject to vesting over four years. Mr. Greisch,
Mr. Miller and Mr. Cavalle paid cash of $3,400, $425 and $425, respectively,
and signed promissory notes of $336,000, $42,075 and $42,075, respectively. The
promissory notes mature on March 4, 2004 and bear interest at 5.3%.

Note 4--Commitments and Contingencies

Risk Management and Insurance

The primary risks to the business are bodily injury, property damage and
injured workers' compensation. The Company maintains liability insurance for
bodily injury and third-party property damage and workers' compensation
coverage that is standard for the industry and considers the coverage
sufficient to insure against these risks. The Company self-insures certain
risks and obtains stop loss and catastrophic coverage from insurance companies.

Legal Proceedings

In the ordinary course of business the Company is involved in legal
proceedings relating to claims arising out of its operations. The Company does
not believe that there are any pending or threatened legal proceedings that are
reasonably likely to have a material adverse effect on it.

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Note 5--Acquisitions

The Company has made the following acquisitions during the six months ended
June 30, 1999. They have all been accounted for as purchases, with the purchase
price being allocated to the fair value of the identified assets and
liabilities of the Company with the excess recorded as goodwill. Amortization
of goodwill is recorded on a straight line basis over 40 years.

On January 11, 1999, the Company acquired all of the capital stock of
Associated Brake Supply, Inc. and its subsidiaries for approximately $57.1
million in cash and $5 million in common and preferred stock. The Company has
allocated $17.4 million of the purchase price to the identified assets and
liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

On January 12, 1999, the Company acquired all of the capital stock of Tisco,
Inc. and Tisco of Redding, Inc. for approximately $6.9 million in cash and $0.8
million in common and preferred stock. The Company has allocated $2.9 million
of the purchase price to the identified assets and liabilities. The acquisition
was accounted for as a purchase and the consolidated financial statements for
the Company include income since the date of acquisition.

On April 20, 1999, the Company acquired all of the equity interest of Active
Gear, L.L.C. for approximately $7.6 million in cash and $1.0 million in common
and preferred stock. The company has allocated $3.8 million of the purchase
price to the indentified assets and liabilities. The acquisition was accounted
for as a purchase and the consolidated financial statements for the Company
include income since the date of acquisition.

On May 28, 1999, the Company acquired substantially all of the assets of
Vantage Parts, a division of CNF Transportation Inc., for approximately $28.5
million in cash. The Company has allocated $15.7 million of the purchase price
to the identified assets and liabilities. The acquisition was accounted for as
a purchase and the consolidated financial statements for the Company include
income since the date of acquisition.

On June 7, 1999, the Company acquired all of the capital stock of Superior
Truck & Auto Supply, Inc. for approximately $1.7 million in cash and $0.3
million in common and preferred stock. The Company has allocated $1.7 million
of the purchase price to the identified assets and liabilities. The acquisition
was accounted for as a purchase and the consolidated financial statements for
the Company include income since the date of acquisition.

In connection with the acquisitions, the Company recorded certain liabilities
totaling $1.6 million relating to vendor consolidations, the closure of
duplicate facilities and other activities that will be phased out during 1999
and 2000.

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The following unaudited pro forma financial information combines the results
of operations of City Truck and Trailer Parts, Inc., Stone Heavy Duty, Inc.,
Truck & Trailer Parts, Inc., Tampa Brake and Supply Co., Inc., Connecticut
Driveshaft, Inc., Truckparts, Inc., Tisco, Inc., Associated Brake Supply, Inc.,
Active Gear, L.L.C., Vantage Parts and Superior Truck & Auto Supply, Inc. as if
the acquisitions had taken place on January 1, 1998 after giving effect to
certain adjustments including: amortization of goodwill, interest expense and a
normal charge for income taxes assuming all of the companies operated as "C"
corporations for 1998 and 1999.

[Enlarge/Download Table]

Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- ------------------------------------
1999 1998 1999 1998
----------------- ----------------- ------------------ -----------------
Actual Pro forma Actual Pro forma Actual Pro forma Actual Pro forma
------- --------- ------- --------- -------- --------- ------- ---------

Sales................... $75,562 $86,063 $18,001 $83,257 $141,530 $170,313 $33,755 $163,220
Net income and
comprehensive income... 1,832 2,091 839 539 2,683 3,294 2,806 1,082

Note 6--Senior Subordinated Notes

On April 8, 1999, the Company filed a registration statement with the
Securities and Exchange Commission. The Company expects to exchange the $100.0
million 12% Senior Subordinated Notes due 2005 for exchange notes of the same
form and terms as the private notes, except that the exchange notes will be
registered under the Securities Act, and, therefore, the exchange notes will
not be subject to certain transfer restrictions, registration rights and
certain provisions providing for an increase in the interest rate of the
private notes under certain circumstances relating to the registration of the
exchange notes.

Note 7--Subsequent Events

On August 9, 1999, the Company acquired certain assets of Certified Power,
Inc. for approximately $6.8 million in cash. The Company has allocated $2.5
million of the purchase price to the identified assets and liabilities. The
acquisition was accounted for as a purchase and the consolidated financial
statements for the Company include income since the date of acquisition.

On August 26, 1999, the Company acquired substantially all of the assets of
California Equipment Company and California Equipment Company of Sacramento for
approximately $2.2 million in cash. The Company has allocated $2.2 million of
the purchase price to the identified assets and liabilities. The acquisition
was accounted for as a purchase and the consolidated financial statements for
the Company include income since the date of acquisition.

On September 30, 1999, the Company merged with QDSP Holdings, Inc. (QDSP) by
exchanging all of the outstanding common and preferred stock of QDSP for common
and preferred stock of the Company valued at approximately $72.5 million. QDSP
operates 63 locations in 19 states and had pro forma revenues of approximately
$182 million in 1998. In conjunction with the merger, the Company received
proceeds of $40.0 million in cash from the issuance of the Company's common and
preferred stock to existing shareholders of the Company and QDSP.

On October 8, 1999, the Company acquired all of the capital stock of Wheels
and Brakes, Inc. for approximately $13.0 million in cash. The Company has
allocated $6.2 million of the purchase price to the identified assets and
liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

F-33

424B3 163rd Page of 423 TOC 1st Previous Next ↓Bottom Just 163rd
REPORT OF INDEPENDENT ACCOUNTANTS

To Board of Directors and Shareholders of
Stone Heavy Duty, Inc.

In our opinion, the accompanying combined balance sheets and related combined
statements of income and retained earnings and cash flows present fairly, in
all material respects, the combined financial position of Stone Heavy Duty,
Inc. and Ashland Automotive Parts, Inc. (together "the Company") at December
31, 1996 and 1997 and at June 19, 1998 and the results of their operations and
their cash flows for the two years ended December 31, 1997 and for the period
from January 1, 1998 through June 19, 1998 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
March 12, 1999
Chicago, Illinois

F-34

424B3 164th Page of 423 TOC 1st Previous Next ↓Bottom Just 164th
STONE HEAVY DUTY, INC.

COMBINED BALANCE SHEETS

At December 31, 1996 and 1997 and June 19, 1998
(amounts in thousands, except for share data)

[Download Table]

December 31, June 19,
--------------- --------
1996 1997 1998
------- ------- --------
ASSETS
------

Current assets:
Cash and cash equivalents............................. $ 2,697 $ 168 $ 239
Accounts receivable, less allowance for doubtful
accounts of $40...................................... 3,701 4,094 5,144
Inventory............................................. 7,857 9,374 10,305
Prepaid expenses and other current assets............. 212 112 168
Current portion of rebate receivable.................. 605 756 493
------- ------- -------
Total current assets.............................. 15,072 14,504 16,349
Property and equipment, net........................... 1,650 1,764 1,960
Long-term portion of receivables and other assets..... 1,081 1,337 1,828
------- ------- -------
Total assets...................................... $17,803 $17,605 $20,137
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Bank overdraft........................................ $ 1,887 $ 402 $ 1,877
Current portion of long-term debt..................... 140 43 --
Accounts payable...................................... 3,083 3,514 3,886
Accrued liabilities................................... 2,114 1,947 1,509
------- ------- -------
Total current liabilities......................... 7,224 5,906 7,272
Long-term debt.......................................... -- 12 --
------- ------- -------
Total liabilities................................. 7,224 5,918 7,272
------- ------- -------
Stockholders' equity:
Common stock of Stone Heavy Duty, Inc. $1 par value:
Voting, 200,000 shares authorized, 24,999 shares
issued and outstanding............................... 25 25 25
Non-voting, 100,000 shares authorized, 15,000 shares
issued and outstanding............................... 15 15 15
Common stock of Ashland Automotive Parts, Inc., $1 par
value; 265,300 voting shares authorized, 265,300
shares issued and outstanding........................ 265 265 265
Additional paid-in capital.......................... 1,633 1,633 1,633
Retained earnings................................... 8,641 9,749 10,927
------- ------- -------
Total stockholders' equity........................ 10,579 11,687 12,865
------- ------- -------
Total liabilities and stockholders' equity........ $17,803 $17,605 $20,137
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-35

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STONE HEAVY DUTY, INC.

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS

For the Years Ended December 31, 1996 and 1997 and for the
Period From January 1, 1998 Through June 19, 1998
(amounts in thousands)

[Download Table]

Years ended
December 31, Period ended
---------------- June 19,
1996 1997 1998
------- ------- ------------

Net sales....................................... $41,386 $44,019 $24,819
Cost of sales................................... 25,477 27,126 15,657
------- ------- -------
Gross profit................................ 15,909 16,893 9,162
Selling, general and administrative expenses.... 13,195 14,087 7,195
------- ------- -------
Operating income............................ 2,714 2,806 1,967
Other income.................................... 16 35 6
------- ------- -------
Net income and comprehensive income......... 2,730 2,841 1,973
Retained earnings, beginning of year............ 7,032 8,641 9,749
Dividends paid.................................. (1,121) (1,733) (795)
------- ------- -------
Retained earnings, end of year.................. $ 8,641 $ 9,749 $10,927
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-36

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STONE HEAVY DUTY, INC.

COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1997 and
For the Period from January 1, 1998 through June 19, 1998
(amounts in thousands)

[Download Table]

Years ended
December 31, Period ended
---------------- June 19,
1996 1997 1998
------- ------- ------------

Operating activities
Net income and comprehensive income........... $ 2,730 $ 2,841 $ 1,973
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation................................ 485 541 305
Gain on sale of equipment, net.............. (16) (35) (6)
Changes in operating assets and liabilities:
Accounts receivable, net.................. 42 (393) (1,050)
Inventory................................. 679 (1,517) (931)
Prepaid expenses and other current
assets................................... 35 100 (56)
Other assets.............................. 363 (407) (229)
Accounts payable.......................... (778) 431 372
Accrued liabilities....................... (379) (167) (437)
------- ------- -------
Net cash provided by (used in) operating
activities............................. 3,161 1,394 (59)
------- ------- -------
Investing activities
Acquisitions of property and equipment........ (782) (655) (501)
Proceeds from sale of property and equipment.. 16 35 6
Acquisitions, net of cash acquired............ (265) -- --
------- ------- -------
Net cash used in investing activities... (1,031) (620) (495)
Financing activities
Bank overdraft................................ 103 (1,485) 1,475
Principal payments of long-term debt.......... 3 (85) (55)
Payment of dividends.......................... (1,121) (1,733) (795)
------- ------- -------
Net cash provided (used) in financing
activities............................. (1,015) (3,303) 625
------- ------- -------
Net increase (decrease) in cash......... 1,115 (2,529) 71
Cash at beginning of year..................... 1,582 2,697 168
------- ------- -------
Cash at end of year........................... $ 2,697 168 $ 239
======= ======= =======
Supplemental disclosure of cash flow information
Cash paid during year for interest............ $ 17 $ 41 $ 38
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-37

424B3 167th Page of 423 TOC 1st Previous Next ↓Bottom Just 167th
STONE HEAVY DUTY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(amounts in thousands, except for share data)

Note 1--Basis of Presentation

Stone Heavy Duty, Inc. ("Stone") and Ashland Automotive Parts, Inc.
("Ashland") collectively (the "Company") are under common ownership and engage
in the sale of heavy duty truck parts and servicing of medium and heavy duty
vehicles. Effective January 13, 1997, the Company acquired the net assets of
A&B Truck Parts, Inc., a Virginia corporation with its principal business in
Roanoke, Virginia for $352 plus $12 in noncompete agreements. The acquisition
was accounted for under the purchase method of accounting. The combined results
of operations of the Company include the results of A&B Truck Parts, Inc. from
the date of acquisition.

The Company is headquartered in Raleigh, North Carolina and operates
seventeen branches in North Carolina, South Carolina, Virginia, West Virginia
and Tennessee.

Note 2--Summary of Significant Accounting Policies

Principles of Combination

The combined financial statements include all the accounts of the Company as
of June 19, 1998. All intercompany balances have been eliminated in
combination.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.

Inventory

Inventories are stated at the lower of cost or market. Cost is determined
using the average cost method.

Property and Equipment

Property and equipment is carried at cost less accumulated amortization and
depreciation. Depreciation is calculated using primarily accelerated methods
and is charged to operations over the estimated useful lives of the assets
which range from five to fifteen years as follows:

[Download Table]

Method Useful Life
------ -----------

Furniture and fixtures.................... MACRS Double Declining 5-7 years
Equipment................................. MACRS Double Declining 5-7 years
Computer Equipment........................ MACRS Double Declining 5 years
Automobiles and trucks.................... MACRS Double Declining 5 years
Leasehold improvements.................... Straight-line 15 years

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts,

F-38

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STONE HEAVY DUTY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

may be exchanged for credit at the time of a sale or within a specified period.
Returned cores are either returned to the vendor for credit or remanufactured.

Income Taxes

The Company has elected "S" corporation status for federal and state income
tax reporting purposes. Accordingly, all federal and state income tax
liabilities pass through to the stockholders. Ashland has elected to be treated
as a "C" corporation which is subject to income taxes. Ashland has adopted
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", ("SFAS 109") however, the impact does not have a material impact on the
combined financial statements.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

Note 3--Inventory

The inventory balances at December 31, 1996 and 1997 and for the period
ending June 19, 1998 consist of the following:

[Download Table]

December 31, June 19,
------------- --------
1996 1997 1998
------ ------ --------

Parts................................................. $6,101 $7,177 $ 8,057
Cores................................................. 1,756 2,197 2,248
------ ------ -------
Total inventory..................................... $7,857 $9,374 $10,305
====== ====== =======

Note 4--Other Assets

Other assets at December 31, 1996 and 1997 and June 19, 1998 consist of the
following:

[Download Table]

December 31, June 19,
------------- --------
1996 1997 1998
------ ------ --------

Rebate receivable..................................... $ 438 $ 574 $1,268
Patronage dividend receivable......................... 1,179 1,450 984
Other................................................. 69 69 69
------ ------ ------
1,686 2,093 2,321
Less: current portion of dividend receivable.......... 605 756 493
------ ------ ------
$1,081 $1,337 $1,828
====== ====== ======

F-39

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STONE HEAVY DUTY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

The Company is a member of a buying cooperative that makes annual patronage
dividends to its members. These annual patronage dividends are paid by the
buying cooperative in two equal installments, one sixty days and the other
three years after year end.

Note 5--Property and Equipment

Property and equipment are recorded at cost. At December 31, 1996 and 1997
and June 19, 1998 property and equipment consisted of the following:

[Download Table]

December 31, June 19,
------------- --------
1996 1997 1998
------ ------ --------

Furniture and fixtures................................ $ 226 $ 297 $ 372
Equipment............................................. 3,003 3,133 3,206
Computer equipment.................................... 612 704 772
Automobiles and trucks................................ 1,563 1,791 2,014
Leasehold improvements................................ 700 834 896
------ ------ ------
6,104 6,759 7,260
Less accumulated depreciation......................... 4,454 4,995 5,300
------ ------ ------
$1,650 $1,764 $1,960
====== ====== ======

Note 6--Line of Credit

At June 19, 1998 the Company had an unsecured line of credit with a
commercial bank in the amount of $1,500. Amounts borrowed under the line of
credit are payable on demand and the interest rate was at the bank's 90-day
adjusted certificate of deposit rate plus 1%. The line of credit expires May
31, 1998. At June 19, 1998, there were no amounts outstanding under this line
of credit.

Note 7--Long-term Debt

Long-term debt at December 31, 1996 and 1997 and June 19, 1998 consists of
the following:

[Download Table]

December 31, June 19,
-------------- --------
1996 1997 1998
------ ------ --------

8.25% unsecured notes payable to former
shareholders of A&B Truck Parts, Inc., payable in
quarterly installments of $12 through January
1999.............................................. $ -- $ 55 $ --
7.71% unsecured note payable to an irrevocable
trust in annual installments of $14, including
interest, through January 1996, with a final
payment of $140 in January 1997................... 140 -- --
------ ----- ----
140 55
Less--current portion.............................. (140) (43) --
------ ----- ----
$ -- $ 12 $ --
====== ===== ====

F-40

424B3 170th Page of 423 TOC 1st Previous Next ↓Bottom Just 170th
STONE HEAVY DUTY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 8--Accrued Liabilities

At December 31, 1996 and 1997 and June 19, 1998 accrued expenses include the
following:

[Download Table]

December 31, June 19,
------------- --------
1996 1997 1998
------ ------ --------

Accrued payroll...................................... $1,496 $1,199 $ 996
Accrued benefits..................................... 435 498 336
Other accruals....................................... 183 250 177
------ ------ ------
Total accrued expenses............................. $2,114 $1,947 $1,509
====== ====== ======

Note 9--Retirement Savings Plan

The Company has a defined contribution retirement savings plan which covers
substantially all full-time employees. Eligible employees may contribute up to
6% of their annual compensation. The Company may match all or a portion of
these contributions. Retirement plan expenses were $233, $272 and $62 for the
years ending December 31, 1996 and 1997 and for the period ending June 19,
1998, respectively.

Note 10--Related Party Transactions

The Company leases seven branch facilities under noncancelable operating
leases with directors, officers and stockholders that extend through 2001.
Certain of these leases have renewal options. The following is a schedule of
future minimum lease payments under these leases as of June 19, 1998:

[Download Table]

1998.................................................................. $ 300
1999.................................................................. 565
2000.................................................................. 360
2001.................................................................. 282
2002 and thereafter................................................... 19
------
Total............................................................... $1,526
======

Aggregate payments of approximately $539, $1,057 and $923 were made to these
directors, officers and stockholders under these leases during 1996 and 1997
and for the period ending June 19, 1998, respectively.

The Company owns a minority interest in the stock of HD America, Inc., a
cooperative. For the years ended December 31, 1996 and 1997 and for the period
ending June 19, 1998, the Company purchased approximately 56%, 56% and 60% of
its goods through this cooperative and accrued a patronage dividend of $1,179,
$1,450 and $985, which was allocated between cost of sales and inventory.

F-41

424B3 171st Page of 423 TOC 1st Previous Next ↓Bottom Just 171st
STONE HEAVY DUTY, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Note 11--Operating Leases

The Company leases certain branch facilities under operating leases with
third-parties with terms extending through 2001. Certain of these leases have
renewal options. At June 19, 1998, the future minimum rental payments required
under these noncancelable leases are as follows:

[Download Table]

1998.................................................................... $187
1999.................................................................... 260
2000.................................................................... 70
2001.................................................................... 25
2002 and thereafter..................................................... --
----
Total................................................................. $542
====

Rent expense for third-party operating leases was approximately $313, $359
and $180 during the years ended 1996 and 1997 and for the period ending June
19, 1998, respectively.

Note 12--Commitments and Contingencies

The Company has a Stock Purchase Agreement (the "Agreement") whereby, upon a
shareholder's death or disability, the Company can be required to purchase the
individual's outstanding shares of stock. The purchase price stipulated in the
Agreement is the fair market value of the stock, as determined by the
stockholders. The Company is also the beneficiary under certain shareholder
life insurance policies from which the proceeds may be used to purchase the
shares.

The Company is self-insured for employee medical and dental benefits, general
liability, automobile and workers' compensation claims with various levels of
stop-loss coverage. The Company has two unsecured letters of credit with a bank
related to medical and dental insurance.

The Company also has two unsecured letters of credit with banks of
approximately $448 as required by the buying cooperative. These letters expire
on December 31, 1998.

Note 13--Subsequent Event

On June 19, 1998, the Company was acquired by HDA Parts System, Inc. The
financial statements have not been effected by this transaction.

F-42

424B3 172nd Page of 423 TOC 1st Previous Next ↓Bottom Just 172nd
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Associated Brake Supply, Inc. and Affiliate

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Associated
Brake Supply, Inc. and Affiliates (the "Company") at December 26, 1997 and
December 31, 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit include examining, on a test basis evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
March 12, 1999
Chicago, Illinois

F-43

424B3 173rd Page of 423 TOC 1st Previous Next ↓Bottom Just 173rd
ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

CONSOLIDATED BALANCE SHEETS

At December 26, 1997 and December 31, 1998
(amounts in thousands)

[Download Table]

1997 1998
------- -------
ASSETS
------

Current assets:
Trade accounts receivable, net of allowance for doubtful
accounts of $65 and $83 .................................... $ 5,403 $ 5,904
Inventories ................................................. 10,945 10,695
Prepaid expenses and other current assets ................... 782 673
Receivables from related parties ............................ 1,936 2,200
------- -------
Total current assets ...................................... 19,066 19,472
Property and equipment, net of accumulated depreciation........ 2,435 2,461
Other assets:
Notes receivables from related parties, net of current
portion..................................................... 1,409 1,727
Deposits and other........................................... 164 108
------- -------
Total assets............................................... $23,074 $23,768
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Bank overdraft............................................... $ 2,192 $ 3,060
Line of credit............................................... 4,000 4,000
Indebtedness to related parties.............................. 909 1,140
Current portion of long-term debt............................ 538 576
Accounts payable............................................. 3,471 3,270
Accrued expenses............................................. 771 1,128
Other current liabilities.................................... 362 239
------- -------
Total current liabilities.................................. 12,243 13,413
Long-term debt:
Long-term debt to related parties, net of current portion.... 3,179 3,145
Long-term debt, net of current portion....................... 1,557 1,308
Capital lease obligations, net of current portion............ 8 --
Deferred credit, net........................................... 2,151 2,084
Stockholders' equity:
Common stock................................................. 6 6
Additional paid-in capital................................... 10 10
Retained earnings............................................ 3,920 3,802
------- -------
Total stockholders' equity................................. 3,936 3,818
------- -------
Total liabilities and stockholders' equity................. $23,074 $23,768
======= =======

The accompanying notes are an integral part of these financial statements.

F-44

424B3 174th Page of 423 TOC 1st Previous Next ↓Bottom Just 174th
ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 27, 1996, December 26, 1997
and December 31, 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- ------- -------

Sales, net........................................... $44,320 $50,508 $57,039
Cost of sales........................................ 27,212 31,539 35,960
------- ------- -------
Gross profit..................................... 17,108 18,969 21,079
------- ------- -------
Operating expenses:
Selling expenses................................... 9,636 10,670 11,668
General and administrative......................... 3,743 3,984 4,561
Depreciation and amortization...................... 477 375 738
------- ------- -------
13,856 15,029 16,967
------- ------- -------
Income from operations............................... 3,252 3,940 4,112
------- ------- -------
Other income (expense):
Interest expense, net.............................. (475) (552) (781)
Other income (expense), net........................ 13 (1) (12)
------- ------- -------
(462) (553) (793)
------- ------- -------
Income before income taxes....................... 2,790 3,387 3,319
Income tax (benefit) expense......................... (30) 199 2
------- ------- -------
Net income and comprehensive income.............. $ 2,820 $ 3,188 $ 3,317
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-45

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended December 27, 1996, December 26, 1997
and December 31, 1998
(amounts in thousands)

[Download Table]

Additional
Common Paid-in Retained
Stock Capital Earnings Total
------ ---------- -------- -------

Balance, December 29, 1995.................. $ 6 $10 $ 2,343 $ 2,359
Distributions............................. (1,706) (1,706)
Net income and comprehensive income....... 2,820 2,820
--- --- ------- -------
Balance, December 27, 1996.................. 6 10 3,457 3,473
Distributions............................. (2,725) (2,725)
Net income and comprehensive income....... 3,188 3,188
--- --- ------- -------
Balance, December 26, 1997.................. 6 10 3,920 3,936
Distributions............................. (3,435) (3,435)
Net income and comprehensive income....... 3,317 3,317
--- --- ------- -------
Balance, December 31, 1998.................. $ 6 $10 $ 3,802 $ 3,818
=== === ======= =======

F-46

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 27, 1996,
December 26, 1997 and December 31, 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- -------- --------

Cash flows from operating activities:
Net income and comprehensive income............. $ 2,820 $ 3,188 $ 3,317
Adjustments to reconcile net income to net cash
provided (used) in operating activities:
Depreciation and amortization.................. 477 375 738
Provision for bad debts........................ 67 103 82
Loss (gain) on disposition of assets, net...... (13) 1 12
Deferred income taxes.......................... (137) 150 --
(Increase) decrease in:
Trade accounts receivable...................... 198 (874) (583)
Inventories.................................... 1,012 (1,861) 250
Prepaid expenses and other..................... (10) (61)
Notes receivable from related parties.......... 169 (552) (372)
Employee advances.............................. 27 (40) (60)
Advances to stockholders, net.................. 142 (2,030) 85
Prepaid income taxes........................... 91 -- --
Income tax refund receivable................... -- (202) 170
Deposits and other............................. (78) (36) 56
Increase (decrease) in:
Accounts payable............................... (834) 1,363 (201)
Accrued expenses............................... 631 86 356
Sales tax payable.............................. (26) 51 2
Income taxes payable........................... 10 (668) --
------- -------- --------
Net cash provided (used) in operating
activities.................................. 4,546 (1,007) 3,852
------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment............. (422) (412) (588)
Proceeds from sales of property and equipment... 35 31 30
------- -------- --------
Net cash used in investing activities........ (387) (381) (558)
------- -------- --------
Cash flows from financing activities:
Increase (decrease) in bank overdraft........... (253) 623 868
Principal payments on notes payable............. (1,200) (465) (630)
Principal payments on capital lease
obligations.................................... -- (29) (32)
Principal payments on subordinated notes
payable........................................ -- (16) (65)
Proceeds from line of credit.................... 2,150 17,050 16,919
Principal payments on line of credit............ (3,150) (13,050) (16,919)
Distributions to stockholders................... (1,706) (2,725) (3,435)
------- -------- --------
Net cash provided (used) in financing
activities.................................. (4,159) 1,388 (3,294)
------- -------- --------
Net change in cash................................ 0 0 0
Cash, beginning of year........................... 0 0 0
------- -------- --------
Cash, end of year................................. $ 0 $ 0 $ 0
======= ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest....................................... $ 789 $ 537 $ 475
Taxes.......................................... 32 818 99

The accompanying notes are an integral part of these financial statements.

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

Notes to Consolidated Financial Statements
(amounts in thousands, except for share data)

Note 1. Basis of Presentation and Description of Business

Basis of Presentation

For each of three fiscal years ending December 31, 1998, the consolidated
financial statements of Associated Brake Supply, Inc. and Affiliates (the
"Company") include the results of Associated Brake Supply, Inc., Freeway Truck
Parts of Washington, Inc., Onyx Distribution, Inc., Associated Truck Parts of
Nevada, Inc., Associated Auto Parts, Inc., Freeway Truck Parts, Inc. and ATPM,
Inc. All of these companies operate in the same business and have been under
common control and ownership for the three year period ended December 31, 1998.

Note 2. Summary of Significant Accounting Policies

Method of Consolidation

The consolidation of these companies has been accounted for in a manner
similar to a pooling of interest under Accounting Principles Board Opinion No.
16. Accordingly, all prior period financial statements have been restated to
include the combined results of operations, financial position and cash flows
of these companies, as if they had always been a part of the Company. All
material intercompany transactions have been eliminated.

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of sale or within a specified period. Returned cores are either returned
to the vendor for credit or remanufactured.

Use of Estimates

Cash and Cash Equivalents

All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents. These amounts are stated at cost
which approximates fair value.

Inventories

Inventories consist of truck parts and are valued at the lower of cost or
market. Cost is determined on the average cost method.

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is provided using straight-line and accelerated
methods over the estimated useful lives of the assets. Maintenance and repairs
are charged to operations.

Methods of depreciation and useful lives for property and equipment are as
follows:

[Download Table]

Useful
Method life
---------------- ---------

Buildings and improvements Straight line 39 years
Computer equipment Double declining 5 years
Machinery, equipment, furniture & fixtures Double declining 5-7 years
Vehicles Double declining 5 years

Note 3. Inventories

Inventories consist of the following at:

[Download Table]

December 26, December 31,
1997 1998
------------ ------------

Parts.............................................. $ 9,404 $ 9,094
Cores.............................................. 1,541 1,601
-------- --------
$ 10,945 $ 10,695
======== ========

Note 4. Property and equipment

Property and equipment consist of the following at:

[Download Table]

December 26, December 31,
1997 1998
------------ ------------

Land............................................... $ 382 $ 382
Buildings and improvements......................... 1,205 1,482
Computer equipment................................. 337 525
Machinery, equipment, furniture & fixtures......... 2,387 2,399
Vehicles........................................... 305 260
------ ------
4,616 5,048
Less accumulated depreciation...................... 2,181 2,587
------ ------
$2,435 $2,461
====== ======

Note 5. Borrowings

Line of Credit

At December 31, 1998, the Company had a line of credit with a bank which
expires on December 31, 1999, and is collaterized by the Company's accounts
receivable, inventory and property and equipment. The maximum borrowing on the
line of credit is the sum of 80% of eligible accounts receivable and the lessor
of $5,400 or 35% of the value of eligible inventory, up to 60% of

F-49

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

the amount of outstanding principal under the line. At December 26, 1997, the
maximum borrowing on the line of credit was $6,000. The line of credit provides
for cash advances, letters of credit up to $750, and financing overdrafts up to
$500. The interest rate on the line of credit was at the bank's reference rate
or an optional interest rate. At December 31, 1998 and December 26, 1997,
optional interest rates consist of (1) the short-term fixed rate plus 0.0% and
2.0%, respectively, (2) the offshore rate and the Cayman rate plus 2.0%,
respectively, or (3) the LIBOR rate 2.0%. The Company has the option to finance
a portion or all of the amount outstanding on the line of credit at the
different interest options above. At December 31, 1998, the Company has $4,000
outstanding on the line of credit at the bank's reference rate. At December 31,
1998, the bank's reference rate is 7.75%. The line of credit is guaranteed by
the Company's subsidiaries and subordinated to the Company's indebtedness to a
trust.

Notes Payable

At December 31, 1998, the Company has a note payable with a bank in which the
principal and interest are due August 2003, and is collaterized by accounts
receivable, inventory and property and equipment. The maximum borrowing limit
on this note is $1,250. The interest rate was at the bank's reference rate or
an optional interest rate. Interest is payable in monthly principal
installments of $4. At December 31, 1998, the outstanding note payable was
$388.

At December 31, 1998, the Company has a note payable with a bank in which the
principal and interest are due December 2001, and is collaterized by accounts
receivable, inventory and property and equipment. The interest rate was at the
bank's reference rate or an optional interest rate. Interest is payable in
monthly installments of $40. At December 31, 1998, the Company had $1,405
outstanding at the bank's prime rate and $0 at the LIBOR rate.

At December 31, 1998, the Company has a note payable with a bank in which the
principal and the interest are due January 2001, and is collaterized by
accounts receivable, inventory and property and equipment. The note bears
interest at 1.5% over the bank's reference rate. Interest is payable in monthly
principal installments of $4, plus interest. At December 31, 1998, the
outstanding note payable was $91.

[Download Table]

December 27, December 31,
1997 1998
------------ ------------

Line of credit..................................... $ 4,000 $ 4,000
Note payable, bank................................. 30 388
Note payable, bank................................. 1,927 1,405
Note payable, bank................................. 138 91
Less current portion............................... (4,538) (4,576)
------- -------
Long-term debt..................................... $ 1,557 $ 1,308
======= =======

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

The aggregate maturities of debt as of December 31, 1998, are as follows:

[Download Table]

Year ending in December,

1999............................................................ $4,576
2000............................................................ --
2001............................................................ 968
2002............................................................ --
2003............................................................ 340
Thereafter...................................................... --
------
$5,884
======

The above debt agreements contain certain covenants that, among other things,
limit the ability of the Company and the Guarantors to: (i) make any loans to
or make any payments on loans to any of the Company's stockholders or ex-
stockholders, if any default occurs; (ii) incur additional Debt; (iii) extend
loans to subsidiaries or affiliates in excess of $750,000 outstanding at any
one time; (iv) enter into certain guarantees of Debt; (v) extend loans or
extensions of credit to any individual or entity; (vi) make investments in, or
give capital contributions to any individual or entity; (vii) encumber or sell
assets; (viii) merge or consolidate with any other entity or transfer or lease
all or substantially all of their assets.

Note 6. Operating leases and capital lease obligations and commitments

The Company leased equipment under agreements which are accounted for under
capital leases. The net balance of property and equipment at December 31, 1997
and 1998 under the capital leases is as follows:

[Download Table]

1997 1998
---- ----

Gross amount under capital leases.............................. $89 $89
Less accumulated depreciation.................................. 39 53
--- ---
$50 $36
=== ===

The Company leases automobiles and its facilities under non-cancelable
operating leases expiring through May 2001, that have an initial or remaining
lease terms in excess of one year as of December 31, 1998. The facilities'
leases have varying renewal options and a varying escalation clause based on
minimal increases and/or the consumer price index. Total rental expense for the
operating leases is approximately $707, $812, and $917 for the years ended
December 27, 1996, December 26, 1997 and December 31, 1998.

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

Future minimum lease payments for non-cancelable operating leases and capital
lease obligations are as follows:

[Download Table]

Capital Operating
leases leases
Year ending in December 31, ------- ---------

1999..................................................... $ 9 $1,421
2000..................................................... -- 1,327
2001..................................................... -- 928
2002..................................................... -- 698
2003..................................................... -- 547
Thereafter............................................... -- 2,201
--- ------
Total minimum lease payments............................. 9 $7,122
--- ======
Less amounts representing interest ........................ 1
---
Present value of minimum lease payments.................... $ 8
===

Note 7. Commitments and Contingencies

At December 27, 1997 and December 31, 1998 the Company has open stand-by
letters of credit totaling $490 and $448, respectively.

Note 8. Deferred credit

The deferred credit consists of the excess of net assets acquired over the
cost of Freeway Truck Parts, Inc., by ATPM, Inc. in 1988. The Company merged
with ATPM, Inc. under a method similar to a pooling of interest as of October
1, 1997 and carried over assets and liabilities at historical cost. The
deferred credit is being amortized over 40 years, and for each of the three
years ended December 31, 1998, amortization income recognized was $70.

Note 9. Retirement plan

The Company has a 401(k) profit sharing plan covering all eligible employees.
Under the provisions of the agreement, employees are allowed to make deferrals
to which the Company can elect to match at a rate of 25% of employee
contributions, up to a maximum of 15% of the participants' compensation. For
each of the three years ended December 31, 1998, the Company expensed
contributions of approximately $95, $98 and $108, respectively.

Note 10. Related party transactions

The Company leases facilities under operating leases from an ex-stockholder
and employee of the Company. Rent expense on the leases totaled $31 and for
each of the three years ended December 31, 1998.

At December 26, 1997 and December 31, 1998, the Company has advanced the
stockholders $1,206 and $1,417, respectively. The advances are non-interest
bearing and are due on demand. At December 31, 1998, the Company has an amount
due to the shareholders in the amount of $295.

F-52

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

At December 26, 1997 and December 31, 1998, the Company had long-term notes
receivable from certain stockholders of $2,139 and $2,510, respectively. The
current portion of these notes was $730 and $782 on December 26, 1997 and
December 31, 1998, respectively.

For the years ended December 26, 1997 and December 31, 1998, the Company has
a note payable to a trust, subordinated to the line of credit and each of the
note payables, bank. The subordinated note payable originally in the amount of
$3,260, is collaterized by the Company's Stock. The subordinated note payable
is due in monthly principal and interest installments of $24 maturing October
2019, bearing interest at 7.0% per annum. At December 26, 1997 and December 31,
1998, $3,244 and $3,178, respectively, is outstanding on the note payable, of
which $65 and $70, respectively, is current.

At December 26, 1997 and December 31, 1998, the Company had long-term notes
payable to certain stockholders of $844 and $812, respectively. The current
portion of these notes was $844 and $775 on December 26, 1997 and December 31,
1998, respectively.

Note 11. Income taxes

The Company and its affiliate have elected to be taxed under the provision of
Subchapter S of the Internal Revenue Code. Under the provisions, the Company
and affiliate does not pay federal corporate income taxes, but are subject to a
1.5% California corporate income tax. The stockholders of the Company and
affiliate report the Company's taxable income on their individual income tax
return.

Prior to the merger, ATPM, Inc. elected to be taxed as a "C" corporation and
after the merger elected to be taxed under the provision of Subchapter S of the
Internal Revenue Code. Under the provisions, the Company does not pay Federal
corporate income taxes, but is subject to a 1.5% California corporate income
tax.

For each of three years ended December 31, 1998, income tax expenses is
composed of the following:

[Enlarge/Download Table]

1996 1997 1998
-------------------- ------------------- -------------------
Federal State Total Federal State Total Federal State Total
------- ----- ----- ------- ----- ----- ------- ----- -----

Current income tax
expense (benefit)...... $ 25 $ 82 $107 $ 4 $45 $ 49 $-- $ 2 $ 2
Change in deferred tax
assets for ATPM, Inc... (99) (38) (137) 116 21 137 -- -- --
Provision for deferred
taxes.................. -- 13 13 -- -- --
---- ---- ---- ---- --- ---- --- --- ---
Total income tax expense
(benefit):............. $(74) $ 44 $(30) $120 $79 $199 $-- $ 2 $ 2
==== ==== ==== ==== === ==== === === ===

Deferred income taxes are provided for the net tax effects of temporary
differences in the reporting of income for financial statement and income tax
reporting purposes. They arise principally from timing differences related to
the reporting of patronage dividends, and the capitalization of various
expenses required for taxation under Section 263A of the Internal Revenue Code.

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ASSOCIATED BRAKE SUPPLY, INC., AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands, except for share data)

At December 27, 1996, December 26, 1997 and December 31, 1998, the Company
has recorded deferred tax assets of approximately $543, $16 and $14, reflecting
the future deductibility of certain amounts not currently deductible.

Note 12. Common stock

Common stock of the Company includes the following: 10,000 shares of no par
Common Stock for Associated Brake Supply, Inc. in which 400 shares were issued
and authorized (valued at $4) on December 27, 1997 and December 31, 1998, and
10,000 shares of no par Common Stock for Onyx Distribution, Inc. in which 200
shares were issued and authorized (valued at $2) on December 27, 1997 and
December 31, 1998.

Note 13. Subsequent events

On January 11, 1999, HDA Parts System, Inc. purchased the Company. This was
accounted for as a purchase. The financial statements have not been effected by
this transaction.

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424B3 184th Page of 423 TOC 1st Previous Next ↓Bottom Just 184th
REPORT OF INDEPENDENT ACCOUNTANTS

To Board of Directors of HDA Parts System, Inc.

In our opinion, the accompanying combined balance sheets and related combined
statements of income and cash flows present fairly, in all material respects,
the combined financial position of Vantage Parts (the "Company") at December
31, 1997 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PriceWaterhouseCoopers LLP
April 27, 1999
Chicago, Illinois

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VANTAGE PARTS

COMBINED BALANCE SHEETS

At December 31, 1997 and 1998
(amount in thousands)

[Download Table]

1997 1998
------- -------
ASSETS
------

Current assets:
Cash......................................................... $ 275 $ 407
Accounts receivable, less allowance for doubtful accounts of
$444 and $371, respectively ................................ 5,632 5,157
Inventories.................................................. 7,594 9,848
Deferred income taxes........................................ 437 463
Other current assets......................................... 56 320
------- -------
Total current assets....................................... 13,994 16,195
------- -------
Property and equipment, net.................................. 1,335 1,304
Other assets................................................. 79 93
Goodwill, net of accumulated amortization of $11 and $105,
respectively................................................ 1,406 1,312
------- -------
Total assets............................................... $16,814 $18,904
======= =======

LIABILITIES AND EQUITY
----------------------

Current liabilities:
Accounts payable............................................. $ 4,058 $ 3,015
Accrued liabilities.......................................... 535 470
------- -------
Total current liabilities.................................. 4,593 3,485
------- -------
Deferred taxes................................................. 17 50
Commitments and contingencies
Company equity:
Investments by and advances from CNF......................... 12,204 15,369
------- -------
Total liabilities and company equity....................... $16,814 $18,904
======= =======

See Notes to Financial Statements.

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VANTAGE PARTS

COMBINED STATEMENTS OF INCOME

For the three years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- ------- -------

Trade sales.......................................... $27,032 $30,250 $45,156
Affiliate sales...................................... 6,239 7,622 9,856
------- ------- -------
Total sales...................................... 33,271 37,872 55,012
------- ------- -------
Operating expenses:
Cost of sales...................................... 26,506 30,552 43,820
General and administrative......................... 5,400 6,017 8,260
Depreciation....................................... 193 228 271
------- ------- -------
Total operating expenses......................... 32,099 36,797 52,351
------- ------- -------
Income from operations............................... 1,172 1,075 2,661
Interest (expense)................................... (435) (374) (585)
Other income......................................... 3 -- 11
------- ------- -------
Income before income taxes........................... 740 701 2,087
------- ------- -------
Income taxes......................................... 297 282 825
------- ------- -------
Net income and comprehensive income.................. $ 443 $ 419 $ 1,262
======= ======= =======

See Notes to Financial Statements.

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VANTAGE PARTS

COMBINED STATEMENTS OF CASH FLOWS

For the Three Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------- -------

Cash flows from operating activities:
Net income and comprehensive income................. $ 443 $ 419 $ 1,262
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization...................... 219 251 377
Gain on disposal of property and equipment........ (3) -- (11)
Change in operating assets and liabilities net of
effect of acquisitions:
Accounts receivable, net......................... (664) (1,094) 475
Other current assets............................. 28 17 (264)
Inventory........................................ 233 (916) (2,254)
Provision for deferred taxes..................... (132) (92) 7
Other assets..................................... 5 (50) (26)
Accounts payable................................. 1,442 2,373 (1,043)
Accrued and other liabilities.................... 94 (1,963) (65)
------ ------- -------
Net cash provided by (used in) operating
activities..................................... 1,665 (1,055) (1,542)
------ ------- -------
Cash flows from investing activities:
Purchases of property and equipment................. (386) (295) (240)
Proceeds from sale of property and equipment........ 5 -- 11
Acquisition of parts distributorships............... -- (1,652) --
------ ------- -------
Net cash used in investing activities........... (381) (1,947) (229)
------ ------- -------
Cash flows from financing activities:
(Decrease) increase in investment and advances from
CNF................................................ (1,450) 3,124 1,903
------ ------- -------
Net cash (used for) provided by financing
activities..................................... (1,450) 3,124 1,903
------ ------- -------
Net change in cash.................................. (166) 122 132
------ ------- -------
Cash at beginning of year........................... 319 153 275
------ ------- -------
Cash at end of year.................................. $ 153 $ 275 407
====== ======= =======
Supplemental information to cash flows:
Detail of acquisitions:
Fair value of assets................................ $ -- $ 2,425 $ --
Fair value of liabilities........................... -- 2,190 --
------ ------- -------
Net fair value of assets and liabilities............. -- 235 --
Goodwill recorded................................... -- 1,417 --
------ ------- -------
Net cash paid for acquisitions....................... $ -- $ 1,652 $ --
====== ======= =======

See Notes to Financial Statements.

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VANTAGE PARTS

NOTES TO COMBINED FINANCIAL STATEMENTS
(amounts in thousands)

1. Summary of Significant Accounting Policies:

Description of Business

Vantage Parts ("the Company") is owned by CNF Transportation Inc. ("CNF").
The Company is comprised of the assets of CNF's wholly owned Vantage Parts
division and Vantage Parts of Illinois, a wholly owned subsidiary of CNF.

The Company is engaged in the wholesale, retail, and refurbishing of truck
parts throughout the United States. The company is headquartered in Portland,
Oregon and has stores throughout the United States.

The accompanying financial statements have been prepared at the direction of
HDA Parts System, Inc. and reflect the "carve-out" financial position, results
of operations and cash flows of the Company for the periods presented. Certain
corporate general and administrative expenses of CNF have been allocated to the
Company (Note 4) on various bases which, in the opinion of management, are
reasonable. However, such expenses are not necessarily indicative of, and it is
not practicable for management to estimate, the nature and level of expenses
which might have been incurred had the Company operated as a stand-alone
Company.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.

Inventories

Inventories consist of truck parts and cores, and are valued at the lower of
cost or market. Cost is determined on the average cost method.

Property and equipment

Purchase of property and equipment, including additions and improvements and
expenditures for repairs and maintenance that significantly add to productivity
or extend the economic lives of the assets, are capitalized at cost and
depreciated on a straight-line basis over their estimated useful lives as
follows:

[Download Table]

Building and improvements........................................ 10-25 years
Equipment and furniture.......................................... 3-10 years

Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.

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VANTAGE PARTS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Goodwill

Goodwill consists of the acquisition cost in excess of the fair value of the
net assets acquired in 1996 (see Note 3). Goodwill is amortized on a straight-
line basis over fifteen years.

Income Taxes

The Company is included as part of the consolidated U.S. federal income tax
return of CNF. The provision for income taxes is computed on the taxable income
of the Company on a stand-alone basis.

The Company accounts for income taxes based on the asset and liability
approach in accordance with Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". The asset and liability approach requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the financial reporting and
the tax bases of assets and liabilities.

The liability for the current portion of the tax provision is transferred to
the Investments by and advances from CNF account at the end of each year. The
net asset or liability for deferred income taxes has been included in the
accompanying balance sheets.

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of purchase or within a specified period. Returned cores are either
returned to the vendor for credit or remanufactured.

2. Property and Equipment:

Property and equipment consists of the following:

[Download Table]

December 31,
-------------
1997 1998
------ ------

Land.......................................................... $ 145 $ 145
Building and improvements..................................... 781 803
Equipment and furniture....................................... 1,612 1,779
Construction-in-progress...................................... -- 13
------ ------
2,538 2,740
Less accumulated depreciation................................. 1,203 1,436
------ ------
Property and equipment, net................................... $1,335 $1,304
====== ======

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VANTAGE PARTS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

3. Acquisition:

On November 17, 1997, the Company, through CNF, acquired the net assets of
Commercial Trailer Parts and Supply Company ("CTPS"), and Consolidated Spring
and Alignment Company ("CSA"), parts distributorships with a facility in
Willowbrook, Illinois, for cash of $1,652. This acquisition was accounted for
in accordance with the purchase method of accounting, and accordingly the
results of operations of CTPS and CSA were included in the accompanying
statements of income from the acquisition date. The net assets of CTPS and CSA
were included in the accompanying balance sheets at values representing the
allocation of the purchase cost to such net assets. At acquisition, the fair
value of tangible assets and liabilities totaled $2,425 and $2,190,
respectively. The excess of purchase cost over the valuation of the net
tangible assets of $1,417 was recorded as goodwill and is being amortized on a
straight-line basis over 15 years.

The following summary presents unaudited pro forma financial information as
if the CTPS and CSA were acquired at the beginning of each year, rather than
from the date of acquisition, after giving effect to certain adjustments
including amortization of goodwill, interest expense and a normal charge for
income taxes. The pro forma financial summary is for information purposes only,
based on historical information, and does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined.

[Download Table]

1996 1997
------------------- -------------------
Actual Proforma Actual Proforma
------- ----------- ------- -----------
(unaudited) (unaudited)

Net sales.......................... $33,271 $46,878 $37,872 $51,239
Net income and comprehensive
income............................ 443 931 419 951

4. Related Party Transactions:

The Company has entered into sales transactions with CNF and its affiliates.
Revenues from these sales totaled $6,239, $7,622 and $9,856 for the years ended
December 31, 1996, 1997 and 1998, respectively. The Company's sales to CNF were
primarily at market prices as periodically determined by CNF.

CNF provides the Company certain management, data processing, human
resources, purchasing, credit, accounting and tax services. An allocation of
the estimated costs of these services is charged directly to the Company each
month by CNF using varying allocation bases (primarily number of transactions
processed or number of employees covered). The allocation process is consistent
with the methodology used by CNF to allocate costs of similar services provided
to its other business units. The allocated costs of these services, which
aggregated $456, $513 and $842 for the years ended December 31, 1996, 1997 and
1998, respectively, were reflected in general and administrative expenses in
the accompanying statements of operations.

CNF also provides certain employee benefits and insurance coverage to the
Company, including workers' compensation, health and welfare, pension and auto
liability. An allocation of the estimated costs of these services is charged
directly to the Company each month by CNF based on actual costs and using
various allocation methods. The allocation process is consistent with the
methodology used

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VANTAGE PARTS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

by CNF to allocate costs of similar services provided to its other business
units. The allocated costs of these services, which aggregated $514, $757 and
$763 for the years ended December 31, 1996, 1997 and 1998, respectively, were
reflected in cost of sales in the accompanying statements of operations.

The Company is dependent on CNF for financing. CNF maintains a centralized
cash management system and substantially all cash receipts and disbursements
are recorded at the corporate level. The Company is charged or credited for the
net of cash receipts and disbursements each month. The Company incurs a monthly
charge for interest expense from CNF based on a formula which takes into
consideration the Company's rolling twelve month average balance in its
investments by and advances from CNF account, excluding the current year and
cumulative earnings amounts, multiplied by an interest rate. The Company
incurred a charge for interest expense from CNF of $435, $374 and $585 for the
years ended December 31, 1996, 1997 and 1998, respectively.

The following table sets forth the activity in the Company Equity account for
the years ended December 31, 1996, 1997 and 1998.

[Download Table]

1996 1997 1998
------- ------- -------

Balance, beginning of year........................ $ 9,668 $ 8,661 $12,204
Net income and comprehensive income............... 443 419 1,262
Investments by and advances from (distributions
to) CNF.......................................... (1,450) 3,124 1,903
------- ------- -------
Balance, end of year.............................. $ 8,661 $12,204 $15,369
======= ======= =======

5. Income Taxes:

The provision for income taxes for the years ended December 31, 1996, 1997
and 1998 was as follows:

[Download Table]

1996 1997 1998
---- ---- ----

Current income taxes:
Federal.................................................... $133 $153 $672
State...................................................... 32 37 160
Deferred income taxes........................................ 132 92 (7)
---- ---- ----
$297 $282 $825
==== ==== ====

The provision for income taxes differed from the United States statutory rate
for the years ended December 31, 1996, 1997 and 1998 for the following reasons:

[Download Table]

1996 1997 1998
---- ---- ----

Statutory tax rate........................................... $251 $238 $710
State and local taxes, net of federal benefit................ 38 36 105
Non-deductible expenses...................................... 8 8 10
---- ---- ----
$297 $282 $825
==== ==== ====

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VANTAGE PARTS

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Deferred tax assets (liabilities) were comprised of the following at December
31, 1997 and 1998:

[Download Table]

1997 1998
---- ----

Gross deferred tax assets:
Employee benefits.............................................. $ 57 $ 64
Inventories.................................................... 204 246
Accounts receivable............................................ 173 145
Other.......................................................... 3 8
---- ----
437 463
Gross deferred tax liabilities:
Property and equipment......................................... (17) (50)
---- ----
Net deferred tax asset........................................... $420 $413
==== ====

6. Operating Leases:

The Company leases manufacturing, warehouse and office facilities, cars and
certain equipment. Future minimum lease payments required under operating
leases having initial or remaining noncancelable lease terms in excess of one
year are set forth below:

[Download Table]

1999.................................................................. $ 513
2000.................................................................. 385
2001.................................................................. 266
2002.................................................................. 155
2003.................................................................. 148
Thereafter............................................................ 148
------
$1,615
======

Rental expense under operating leases amounted to $433, $484 and $507 for the
years ended December 31, 1996, 1997 and 1998, respectively.

7. Commitments and Contingencies:

The Company is involved in litigation from time to time incidental to the
conduct of its business; however, the Company is not currently a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the financial position or results of operations of
the Company.

8. Subsequent Event:

On February 5, 1999, CNF entered into a letter of intent agreement with HDA
Parts System, Inc. ("HDA") whereby HDA will acquire the Company.

F-63

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VANTAGE PARTS

UNAUDITED COMBINED STATEMENT OF INCOME

For the Period from January 1, 1999 to May 28, 1999
(amounts in thousands)

[Download Table]

Net sales.............................................................. $23,179
Operating expenses:
Cost of sales........................................................ 18,096
General and administrative........................................... 3,957
Depreciation and amortization........................................ 120
-------
Total operating expenses........................................... 22,173
-------
Income from operations................................................. 1,006
Interest (expense)..................................................... (136)
Other (expense)........................................................ (77)
-------
Income before income taxes............................................. 793
-------
Income taxes........................................................... --
-------
Net income and comprehensive income.................................... $ 793
=======

See Notes to Financial Statements.

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VANTAGE PARTS

UNAUDITED COMBINED STATEMENT OF CASH FLOWS

For the Period from January 1, 1999 to May 28, 1999
(amounts in thousands)

[Enlarge/Download Table]

Cash flows from operating activities:
Net income and comprehensive income........................................... $ 793
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization................................................ 120
Change in operating assets and liabilities:
Accounts receivable, net................................................... (401)
Other current assets....................................................... (224)
Inventory.................................................................. 583
Provision for deferred taxes............................................... 157
Other assets............................................................... 27
Accounts payable........................................................... (2,004)
Accrued and other liabilities.............................................. (132)
-------
Net cash used in operating activities..................................... (1,081)
-------
Cash flows from investing activities:
Purchases of property and equipment........................................... (38)
-------
Net cash used in investing activities..................................... (38)
-------
Cash flows from financing activities:
Increase in investment and advances from CNF.................................. 1,110
-------
Net cash provided by financing activities................................. 1,110
-------
Net change in cash............................................................ (9)
-------
Cash at beginning of year..................................................... 407
-------
Cash at end of year............................................................ $ 398
=======

See Notes to Financial Statements.

F-65

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VANTAGE PARTS

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
(amounts in thousands)

1. Summary of Significant Accounting Policies:

Description of Business and Basis of Presentation

The accompanying financial statements reflect the "carve-out" results of
operations and cash flows of the Company for the period presented. Certain
corporate general and administrative expenses of CNF have been allocated to the
Company on various bases which, in the opinion of management, are reasonable.
However, such expenses are not necessarily indicative of, and it is not
practicable for management to estimate, the nature and level of expenses which
might have been incurred had the Company operated as a stand-alone Company.

The consolidated financial information presented herein is unaudited. The
interim financial statements and notes thereto do not include all disclosures
required by generally accepted accounting principles and should be read in
conjunction with the financial statements and notes thereto included in the
latest consolidated financial statements of the Companies. In the opinion of
management, the interim financial statements reflect all adjustments of a
normal recurring nature necessary for a fair statement of the results for
interim periods. The current period's results of operations are not necessarily
indicative of results that ultimately may be achieved for the year.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents are highly liquid investments with original
maturities of three months or less.

Inventories

Inventories consist of truck parts and cores, and are valued at the lower of
cost or market. Cost is determined on the average cost method.

Property and equipment

Purchase of property and equipment, including additions and improvements and
expenditures for repairs and maintenance that significantly add to productivity
or extend the economic lives of the

F-66

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VANTAGE PARTS

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

assets, are capitalized at cost and depreciated on a straight-line basis over
their estimated useful lives as follows:

[Download Table]

Building and improvements........................................ 10-25 years
Equipment and furniture.......................................... 3-10 years

Maintenance, repairs, and minor replacements of these items are charged to
expense as incurred.

Goodwill

Goodwill consists of the acquisition cost in excess of the fair value of the
net assets acquired in 1996. Goodwill is amortized on a straight-line basis
over fifteen years.

Income Taxes

The Company is included as part of the consolidated U.S. federal income tax
return of CNF. The provision for income taxes is computed on the taxable income
of the Company on a stand-alone basis.

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of purchase or within a specified period. Returned cores are either
returned to the vendor for credit or remanufactured.

2. Subsequent Event:

On May 28, 1999, HDA Parts System, Inc. purchased the Company. This was
accounted for as a purchase. The unaudited financial statements have not been
effected by this transaction.

F-67

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Truck and Trailer Parts, Inc. and Affiliate

In our opinion, the accompanying combined balance sheets and the related
combined statements of income and stockholders' equity and cash flows present
fairly, in all material respects, the combined financial position of Truck and
Trailer Parts, Inc. and Affiliate (the "Companies") at December 31, 1996 and
1997 and at September 30, 1998, and the results of their operations and their
cash flows for the years ended December 31, 1996 and 1997 and the nine-month
period ended September 30, 1998 in conformity with generally accepted
accounting principles. These combined financial statements are the
responsibility of the Companies' management; our responsibility is to express
an opinion on these combined financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

December 30, 1998
Atlanta, Georgia

F-68

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

COMBINED BALANCE SHEETS

At December 31, 1996 and 1997 and at September 30, 1998
(amounts in thousands)

[Download Table]

December 31,
------------- September 30,
1996 1997 1998
------ ------ -------------
ASSETS
------

Current assets
Cash and cash equivalents......................... $ 60 $ 18 $ 127
Accounts receivables.............................. 2,021 2,493 3,151
Notes receivable from related parties............. 22 237 --
Inventories....................................... 2,890 4,676 5,281
Prepaid expenses.................................. 72 19 102
Advances to shareholders and employees............ 2 2 2
------ ------ ------
Total current assets............................ 5,067 7,445 8,663
------ ------ ------
Property and equipment
Transportation equipment.......................... 544 646 607
Machinery and equipment........................... 324 404 455
Computer equipment................................ 202 307 309
Office furniture and equipment.................... 137 185 196
Leasehold improvements............................ 16 18 18
------ ------ ------
1,223 1,560 1,585
Less accumulated depreciation..................... 710 916 1,093
------ ------ ------
513 644 492
------ ------ ------
Other assets
Intangible assets, net............................ 48 45 43
Deposits.......................................... 11 17 17
------ ------ ------
59 62 60
------ ------ ------
Total assets.................................... $5,639 $8,151 $9,215
====== ====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities
Line of credit.................................... $ 943 $1,095 $2,725
Current portion of long-term debt................. 89 70 47
Accounts payable.................................. 1,281 2,401 2,416
Accrued liabilities............................... 447 324 268
------ ------ ------
Total current liabilities....................... 2,760 3,890 5,456
Long-term liabilities
Long-term debt.................................... 323 315 265
Notes payable to related parties.................. 132 129 80
------ ------ ------
455 444 345
Stockholders' equity................................ 2,424 3,817 3,414
------ ------ ------
Total liabilities and stockholders' equity...... $5,639 $8,151 $9,215
====== ====== ======

The accompanying notes are an integral part of these financial statements.

F-69

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

COMBINED STATEMENTS OF INCOME AND STOCKHOLDERS' EQUITY

For the Years Ended December 31, 1996 and 1997 and
for the Nine Month Period Ended September 30, 1998
(amounts in thousands)

[Download Table]

Nine Month
Year Ended Period Ended
December 31 September 30,
---------------- -------------
1996 1997 1998
------- ------- -------------

Sales.......................................... $19,963 $24,011 $22,925
Cost of sales.................................. 16,223 19,697 18,702
------- ------- -------
Gross profit............................... 3,740 4,314 4,223
Selling, general and administrative expenses... 2,537 2,838 2,485
------- ------- -------
Income from operations..................... 1,203 1,476 1,738
Other income (expense)
Interest expense............................. (126) (85) (119)
Gain (loss) on disposal of fixed assets...... 12 10 (8)
Other income (expense)....................... 12 10 (8)
------- ------- -------
Income before income taxes................. 1,101 1,411 1,603
Income tax expense............................. 411 18 --
------- ------- -------
Net income and comprehensive income........ 690 1,393 1,603
Stockholders' equity--beginning of year........ 1,734 2,424 3,817
Distributions to stockholders.................. -- -- (2,006)
------- ------- -------
Stockholders' equity--end of period............ $ 2,424 $ 3,817 $ 3,414
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-70

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

COMBINED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 1996 and 1997 and
For the Nine Month Period Ended September 30, 1998
(amounts in thousands)

[Enlarge/Download Table]

Year Ended Nine Month
December 31, Period Ended,
---------------- September 30,
1996 1997 1998
------- ------- -------------

Cash flows from operating activities
Net income and comprehensive income...................................... $ 690 $ 1,393 $ 1,603
Adjustments to reconcile net income to net cash provided by (used for)
operating activities
Depreciation............................................................ 227 265 215
Amortization of intangibles............................................ 2 3 2
(Gain) loss on disposal of fixed assets................................ (12) (10) 8
Changes in operating assets and liabilities
Accounts receivable.................................................. (14) (472) (658)
Notes receivable..................................................... 40 (215) 237
Inventories............................................................. 594 (1,786) (605)
Prepaid expenses..................................................... 13 53 (83)
Other assets......................................................... (10) (6) --
Accounts payable..................................................... (176) 1,120 15
Accrued liabilities.................................................. 135 (123) (56)
------- ------- -------
Net cash provided by operating activities.......................... 1,489 222 678
------- ------- -------
Cash flows provided by (used for) investing activities
Acquisition of property and equipment.................................... (315) (431) (86)
Purchase of a business................................................... (619) -- --
Proceeds from sale of property and
equipment............................................................... 84 45 15
------- ------- -------
Net cash used for investing activities............................. (850) (386) (71)
------- ------- -------
Cash flows provided by (used for) financing activities
Principal payments of long-term debt..................................... (229) (110) (122)
Proceeds fom short term line of credit................................... 7,154 7,755 8,463
Payments of short term line of credit.................................... (7,533) (7,603) (6,833)
Proceeds from issuance of long-term debt................................. 18 80 --
Distribution to stockholders............................................. -- -- (2,006)
------- ------- -------
Net cash provided by (used for) financing activities............... (590) 122 (498)
------- ------- -------
Increase (decrease) in cash and cash equivalents........................... 49 (42) 109
Cash and cash equivalents at beginning of year............................. 11 60 18
------- ------- -------
Cash and cash equivalents at end of period................................. $ 60 $ 18 $ 127
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-71

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS

For the Years Ended December 31, 1996 and 1997 and
For the Nine Month Period Ended September 30, 1998
(amounts in thousands)

Note 1--Basis of Presentation

The accompanying combined financial statements include Truck and Trailer
Parts, Inc. (TTPI) and DHP Leasing, Inc. (the "Companies") which are under
common ownership. TTPI engages in the sale of replacement parts for heavy duty
trucks and trailers in the southeastern United States. DHP Leasing, Inc. leases
certain office and warehouse equipment to TTPI. The combined financial
statements include the accounts of the Companies as of December 31, 1996 and
1997 and September 30, 1998, and for each of the two years ended December 31,
1996 and 1997 and for the nine-month period ended September 30, 1998. All
material intercompany balances have been eliminated.

Effective September 30, 1998 the Companies were acquired by HDA Parts System,
Inc. These financial statements represent the Companies' financial position
prior to any effect of the acquisition.

Note 2--Summary of Significant Accounting Policies

Cash and cash equivalents

Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from date of purchase.

Accounts receivable

Substantially all of the accounts receivable are pledged as collateral for
the bank line of credit (See Note 4). Bad debts charged to operations amounted
to $77 and $106 for 1996 and 1997 and $27 for the nine-month period ended
September 30, 1998, respectively.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the average cost basis (See Note 3).

Property and equipment

Property and equipment is carried at cost less accumulated depreciation.
Improvements, which are capitalized, extend the useful life of the underlying
assets. Expenditures for maintenance and repairs are charged to expense as
incurred. The Companies provide for depreciation of property and equipment
using accelerated methods over estimated useful lives of five to seven years.

Other assets

Included in other assets are goodwill and noncompete agreements totaling $48,
$45, and $43 at December 31, 1996 and 1997 and September 30, 1998,
respectively. These assets are being

F-72

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

amortized over their estimated useful life of 15 years. Accumulated
amortization amounted to $2, $5 and $7 at December 31, 1996 and 1997 and
September 30, 1998, respectively.

Revenue recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of purchase or within a specified period. Returned cores are returned to
the vendor for credit.

Income taxes

On January 1, 1997 and future years TTPI, with the consent of its
stockholders, elected under the Internal Revenue Code to be taxed as an S
corporation. DHP Leasing, Inc., from its inception in 1995, elected to be taxed
as an S corporation. In lieu of corporate income taxes, the stockholders of an
S corporation are taxed on their proportionate share of the Companies' taxable
income. Therefore, no provision or liability for federal income taxes has been
included in the financial statements for 1997. Prior to 1997, deferred income
tax assets and liabilities were recognized for the expected future tax
consequences of temporary differences between the income tax and financial
reporting carrying amounts of assets and liabilities (See Note 7).

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Note 3--Inventories

At December 31, 1996 and 1997 and September 30, 1998, inventories consist of
the following:

[Download Table]

September 30,
1996 1997 1998
------ ------ -------------

Parts Inventory.................................. $2,643 $4,488 $4,955
Core Inventory................................... 247 188 326
------ ------ ------
$2,890 $4,676 $5,281
====== ====== ======

F-73

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Note 4--Long-Term Debt

At December 31, 1996 and 1997 and September 30, 1998 long-term debt consists
of the following:

[Enlarge/Download Table]

September 30,
1996 1997 1998
---- ---- -------------

8% unsecured note payable in monthly installments of $4, including
interest to 2006............................................................... $322 $299 $282
8% note payable, secured by property and equipment, payable in
monthly installments of $2, including interest to 2000......................... -- 63 30
7% note payable, secured by computer equipment with a carrying value
of $55 in 1996 and $44 in 1997................................................. 61 21 --
6.5% note payable, secured by a truck, payable in monthly installments
of $1, including interest in 1998.............................................. 8 2 --
Other........................................................................... 21 -- --
---- ---- ----
Less current portion............................................................ (89) (70) (47)
---- ---- ----
$323 $315 $265
==== ==== ====

The Companies had a maximum availability of $3,000 in 1996, 1997 and 1998 on
a line of credit from a bank with interest payable at the 30 day LIBOR (London
Interbank Offered Rate) plus 2 percent. The line is secured by accounts
receivable and inventories. The Companies' outstanding balance at December 31,
1996 and 1997 and September 30, 1998, was, $943, $1,095 and $2,725
respectively. The Companies paid $126, $85, and $119 interest during 1996,
1997, and 1998, respectively.

Note 5--Combined Stockholders' Equity

At December 31, 1996 and 1997 and September 30, 1998, combined stockholders'
equity consists of the following:

[Enlarge/Download Table]

December 31,
-------------- September 30
1996 1997 1998
------ ------ ------------

Truck and Trailer Parts, Inc
Common stock, $0 par value, 10,000 shares authorized,
1,069 shares issued and outstanding................................ $ -- $ -- $ --
Additional paid-in capital........................................... 55 55 55
Retained earnings.................................................... 2,371 3,728 3,297
------ ------ ------
2,426 3,783 3,352
DHP Leasing, Inc
Common stock, voting, $0 par value, 150,000
shares authorized, 1,000 shares issued and o........................ -- -- --
Additional paid-in capital........................................... 5 5 5
Retained earnings (deficit).......................................... (7) 29 57
------ ------ ------
Stockholders' equity................................................... $2,424 $3,817 $3,414
====== ====== ======

F-74

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Note 6--Employee Benefit Plans

The Companies have a contributory employee benefit plan which is qualified
under Section 401(k) of the Internal Revenue Code. Substantially all employees
are eligible for participation in the plan. An employee may have up to 15% of
his/her salary withheld. The Companies may contribute for each participant a
matching contribution equal to a percentage of the participant's contribution.
The Companies' total expenses for contributions to the plan was $106, $179, and
$88, in 1996, 1997 and 1998, respectively.

Note 7--Commitments

The Companies lease office and warehouse space from related parties. Rent
expense to related parties was $133, $179, and $163 in 1996, 1997, and 1998,
respectively. The Companies also lease office and warehouse space from
unrelated parties. Rent expense to third-parties was $145, $125, and $122 in
1996, 1997, and 1998, respectively. Minimum future rental payments under these
leases for each of the next five years, and thereafter, and in the aggregate,
are as follows:

[Download Table]

Related
Parties Other Total
------- ----- ------

1999.................................................... $224 $ 94 $ 318
2000.................................................... 224 86 311
2001.................................................... 144 82 225
2002.................................................... -- 83 83
2003 and thereafter..................................... -- 463 463
---- ---- ------
Total................................................. $592 $808 $1,400
==== ==== ======

Note 8--Related Party Transactions

Unsecured notes payable, on demand to related parties amounted to $132, $129,
and $80 at December 31, 1996 and 1997 and September 30, 1998, respectively.
Interest on these notes amounted to $10, $8, and $6 in 1996, 1997, and 1998,
respectively. Interest is payable at 1% above the prime rate.

Notes receivable from related parties amounted to $22 and $237 at December
31, 1996 and 1997, respectively. The interest rate was prime plus 2%.

F-75

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TRUCK AND TRAILER PARTS, INC. AND AFFILIATE

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Note 9--Income Taxes

Significant components of the provision for income taxes attributable to
continuing operations are as follows:

[Download Table]

Year
ended
December Nine-Month
31, Period Ended
---------- September 30,
1996 1997 1998
---- ---- -------------

Current expense
Federal.......................................... $366 $-- $ --
State............................................ 65 -- --
---- --- ----
Total current.................................... 431 -- --
Deferred expense (benefit)
Federal.......................................... $(17) $15 $ --
State............................................ (3) 3 --
---- --- ----
Total deferred................................... $411 $18 $ --
==== === ====

Income taxes in the amount of $356 and $38 were paid in 1996 and 1997,
respectively. In conjunction with the election on January 1, 1997 to be taxed
as an S corporation, Truck & Trailer Parts, Inc. (TTPI) recognized an expense
of $18 resulting from the transfer of TTPI's deferred tax assets to its
stockholders as explained in Note 1.

At December 31, 1997, significant components of TTPI's deferred tax assets
were as follows:

[Download Table]

Deferred tax assets
Uniform capitalization................................................ $16
Capital loss carryforwards............................................ 2
---
$18
===

As described in Note 1, TTPI filed a Subchapter S election effective January
1, 1997. Therefore, there is no current income tax provision for the periods
ended December 31, 1997 and September 30, 1998. The amount included in the 1997
income statement for income tax expense reflects the write-off of the deferred
tax asset.

Note 10--Subsequent Event

Effective September 30, 1998, the Companies were sold to HDA Parts System,
Inc. The financial statements have not been effected by this transaction. As a
result of this transaction, the Companies' operating facilities in Greenville,
SC, and Dalton, GA, have been transferred to other companies held by HDA Parts
System, Inc.

F-76

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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
HDA Parts System, Inc.
Chicago, Illinois

We have audited the accompanying balance sheet of Connecticut Driveshaft,
Inc. as of September 30, 1998, and the related statements of income, retained
earnings, and cash flows for the nine months ended September 30, 1998. The
financial statements are the responsibility of Connecticut Driveshaft, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Connecticut Driveshaft, Inc.
as of September 30, 1998, and the results of its operations and its cash flows
for the nine months ended September 30, 1998, in conformity with generally
accepted accounting principles.

/s/ McGladrey & Pullen, LLP
Minneapolis, Minnesota
November 4, 1998

F-77

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CONNECTICUT DRIVESHAFT, INC.

BALANCE SHEET

September 30, 1998
(In thousands, except share data)

[Download Table]

ASSETS
------

Current Assets
Cash and cash equivalents............................................. $ 3
Receivables:..........................................................
Trade, less allowance for doubtful accounts of $268................. 1,824
Vendor.............................................................. 236
Inventories........................................................... 4,863
Other assets.......................................................... 31
------
Total current assets.............................................. 6,957
------
Equipment and Leasehold Improvements, at cost (Note 2)
Machinery and equipment............................................... 1,026
Vehicles.............................................................. 952
Furniture and fixtures................................................ 686
Leasehold improvements................................................ 202
------
2,866
Less accumulated depreciation......................................... 2,552
------
314
------
Cash Value of Life Insurance............................................ 247
------
Security Deposits....................................................... 14
------
$7,532
======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities
Bank note payable (Note 2)............................................ $1,713
Current maturities of long-term debt (Note 2)......................... 56
Accounts payable...................................................... 1,802
Accrued expenses...................................................... 376
Income taxes payable.................................................. 138
------
Total current liabilities......................................... 4,085
------
Long-Term Debt, less current maturities (Note 2)........................ 5
------
Commitments and Contingencies (Notes 4 and 5)...........................
Stockholders' Equity
Common stock, no par value; authorized 5,000 shares; issued and
outstanding 1,000 shares............................................. 1
Retained earnings..................................................... 3,441
------
3,442
------
$7,532
======

See Notes to Financial Statements.

F-78

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CONNECTICUT DRIVESHAFT, INC.

STATEMENT OF INCOME

Nine Months Ended September 30, 1998
(In thousands)

[Download Table]

Net sales.............................................................. $14,860
Cost of goods sold..................................................... 11,038
-------
Gross profit....................................................... 3,822
Operating expenses (Note 3)............................................ 3,497
-------
Operating income................................................... 325
-------
Nonoperating income (expense):
Interest income...................................................... 7
Interest expense..................................................... (126)
-------
(119)
-------
Income before income taxes......................................... 206
Provision for state income taxes....................................... (32)
-------
Net income......................................................... $ 174
=======

STATEMENT OF RETAINED EARNINGS

Nine Months Ended September 30, 1998
(In thousands)

[Download Table]

Balance, beginning (Note 6)............................................. $3,267
Net income............................................................ 174
------
Balance, ending......................................................... $3,441
======

See Notes to Financial Statements.

F-79

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CONNECTICUT DRIVESHAFT

STATEMENT OF CASH FLOWS

Nine Months Ended September 30, 1998
(In thousands)

[Download Table]

Cash Flows From Operating Activities
Net income............................................................ $ 174
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation........................................................ 131
Changes in assets and liabilities:
Trade receivables................................................. (80)
Vendor receivables................................................ (50)
Inventories....................................................... (241)
Other assets...................................................... 3
Accounts payable.................................................. (99)
Accrued expenses.................................................. 68
Income taxes payable.............................................. 20
-----
Net cash used in operating activities........................... (74)
-----
Cash Flows From Investing Activities
Increase in cash value of life insurance.............................. (16)
Purchase of equipment................................................. (22)
-----
Net cash used in investing activities........................... (38)
-----
Cash Flows From Financing Activities
Net borrowings on bank note payable................................... 171
Principal payments on long-term debt.................................. (63)
-----
Net cash provided by financing activities....................... 108
-----
Decrease in cash and cash equivalents........................... (4)
Cash and Cash Equivalents
Beginning............................................................. 7
-----
Ending................................................................ $ 3
=====

Supplemental Disclosures of Cash Flow Information
Cash payments for interest............................................ $ 125
Cash payments for income taxes........................................ 2
=====

See Notes to Financial Statements.

F-80

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CONNECTICUT DRIVESHAFT, INC.

NOTES TO FINANCIAL STATEMENTS
(In Thousands)

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: The Company is a distributor of motor vehicle parts and
repairs and rebuilds driveshafts, brake shoes, and brake drums. The Company
operates out of six locations in Connecticut and Massachusetts. The Company
sells its products primarily to customers in the United States on credit terms
that the Company establishes for its customers.

A summary of the Company's significant accounting policies follows:

Cash and cash equivalents: For purposes of reporting the statement of cash
flows, the Company considers all cash accounts, which are not subject to
withdrawal restrictions or penalties, and all highly liquid debt instruments to
be cash equivalents. The Company maintains its cash accounts at levels which at
times may exceed federally insured limits. The Company has not experienced any
losses on these deposits.

Vendor receivables: The vendor receivables consist primarily of rebates to be
received from vendors for meeting certain purchase levels. The receivable
represents management's estimate of rebates to be received based on purchasing
activity calculated by rates included in the rebate agreements.

Inventories: Inventories are stated at the lower of cost (first in, first out
method) or market, and are comprised solely of purchased and finished goods.

Depreciation: Depreciation is computed over the estimated useful lives of the
respective assets using accelerated methods. The estimated useful lives by
class are as follows:

[Download Table]

Years
-----

Machinery............................................................. 3-10
Vehicles.............................................................. 3-5
Furniture and fixtures................................................ 3-7
Leasehold improvements................................................ 10-40

Income taxes: The Company, with the consent of its stockholders, has elected
to be taxed under sections of federal income tax law, which provide that, in
lieu of corporation income taxes, the stockholders separately account for their
pro rata shares of the Company's items of income, deductions, losses, and
credits. As a result of this election, no federal income taxes have been
recognized in the accompanying financial statements. For state income tax
purposes, the Company is required to pay corporate income taxes, and
accordingly, these taxes have been reflected in the accompanying financial
statements.

Revenue recognition: Revenue is recognized when products are shipped. Sales
for core parts are recorded net of exchanges and core credits. Cores may be
exchanged for credit at the time of a sale or within a specified period.
Returned cores are either returned to the vendor for credit or remanufactured.

Segment information: In June 1998, the FASB issued SFAS Statement No 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement, effective for financial

F-81

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CONNECTICUT DRIVESHAFT, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands)

statements for fiscal years beginning after December 15, 1997, requires that a
public business enterprise report financial and descriptive information about
its reportable operating segments. Generally, financial information is required
to be reported on the basis that is used internally for evaluating segment
performance and deciding how to allocate resources to segments. Based on this
criteria, the Company has determined that it operates in one business segment,
that being the distribution of heavy duty vehicle parts in the United States.
Thus, all information required by SFAS No. 131 is included in the Company's
financial statements.

Fair value of financial instruments: The carrying amounts of cash, accounts
receivable, long-term debt, accounts payable, and accrued expenses approximate
fair value because of the short maturity of these items.

Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

Note 2. Line of Credit and Long-Term Debt

The Company has a $2,000 line of credit available with a financial
institution. Borrowings under the line are limited to 75 percent of eligible
accounts receivable plus the lesser of 25 percent of inventory or $600. The
borrowings bear interest at the prime rate (8.25 percent at September 30, 1998)
and are secured by substantially all of the Company's assets and the guarantee
of the Company's majority shareholder and a related Company. The agreement
expires in November 1998. Borrowings under the line of credit at September 30,
1998, were $1,713. Subsequent to September 30, 1998, pursuant to the terms of
the Asset Purchase Agreement (see Note 5), the line of credit was paid in full.

Long-term debt: Long-term debt consists of the following at September 30,
1998:

[Download Table]

Bank note payable, bearing interest at 8.07%, due in monthly
payments of $4 plus interest, through July 1999, secured by
substantially all assets of the Company and the guarantee of the
Company's majority shareholder and a related Company. Subsequent to
September 30, 1998, pursuant to the terms of the Asset Purchase
Agreement, the note was paid in full............................... $ 42
Note payable to officer, paid in full subsequent to September 30,
1998. Interest expense on this note was $1 during the nine months
ended September 30, 1998........................................... 5
9.9% Capital leases, due in monthly payments of $1, including
interest, through April 2000, secured by vehicles.................. 14
----
61
Less current portion................................................ (56)
----
$ 5
====

Note 3. Leasing Arrangements

The Company leases land and property on a month-to-month basis from related
parties, under five operating leases, requiring various monthly payments.
Subsequent to September 30, 1998, these operating leases were terminated
pursuant to the terms of the Asset Purchase Agreement noted in Note 5.

F-82

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CONNECTICUT DRIVESHAFT, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands)

The Company also leases land, property, and vehicles from unrelated parties,
under operating leases, requiring various monthly payments. The leases expire
at various dates through June 2001. Certain of these leases include an
additional annual payment for property taxes.

Future minimum lease payments on operating lease commitments to unrelated
parties at September 30, 1998, are as follows:

[Download Table]

Fiscal years ending:
1999.................................................................. $140
2000.................................................................. 58
2001.................................................................. 38
----
$236
====

Rent expense was approximately $365 during the nine months ended September
30, 1998, including approximately $241 to related parties.

Note 4. Commitments and Contingencies

Profit sharing: The Company maintains a 401(k) profit sharing plan for
eligible employees. Under the terms of the plan, employees may contribute up to
18 percent of their salary to the plan, not to exceed the maximum allowed by
the IRS. The Company can make discretionary matching contributions. The Company
made matching contributions of $19 to the plan during the nine months ended
September 30, 1998.

Litigation: The Company is a defendant in various lawsuits. In the opinion of
management, these suits are without substantial merit and should not result in
judgments, which in the aggregate, would have a material adverse effect on the
Company's financial statements.

Note 5. Asset Purchase Agreement

On November 4, 1998, the stockholders of Connecticut Driveshaft, Inc. entered
into an asset purchase agreement (the Agreement) with HDA Parts System, Inc.
(HDA) to sell substantially all of the assets of the Company in exchange for
the assumption of certain liabilities of the Company for a purchase price of
$7,300 cash. The acquisition cost includes the assignment of the purchase of
land and buildings from the owners.

In connection with the Agreement, HDA entered into employment agreements with
two shareholders of the Company. These employment agreements can be terminated
by either party at any time. In addition, HDA entered into three-year
noncompete agreements with two shareholders of the Company.

Note 6. Prior-Period Adjustment

The financial statements as presented include prior-period adjustments for
inventory, accounts receivable, vendor receivables, and accrued expenses. The
gross effect on retained earnings at October 1, 1997, was approximately $909.
The effect on retained earnings at October 1, 1997, net of tax, was
approximately $791.

F-83

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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
HDA Parts System, Inc.
Chicago, Illinois

We have audited the accompanying balance sheets of Truckparts, Inc. as of
September 30, 1997 and 1998, and the related statements of income, retained
earnings, and cash flows for the years then ended. The financial statements are
the responsibility of Truckparts, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Truckparts, Inc. as of
September 30, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ McGladrey & Pullen, LLP
Minneapolis, Minnesota
December 18, 1998

F-84

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TRUCKPARTS, INC.

BALANCE SHEETS

September 30, 1997 and 1998
(In thousands)

[Download Table]

1997 1998
------ ------

ASSETS
------

Current Assets
Cash and cash equivalents....................................... $ 134 $ 580
Receivables:
Trade, less allowance for doubtful accounts of $97 (Note 7)... 1,531 1,638
Vendor........................................................ 436 414
Inventories..................................................... 3,237 3,585
Deferred taxes (Note 4)......................................... -- 78
Other assets.................................................... 53 53
------ ------
Total current assets........................................ 5,391 6,348
------ ------
Equipment and Leasehold Improvements, at cost
Transportation equipment (Note 2)............................... 562 623
Leasehold improvements.......................................... 143 143
Furniture and fixtures.......................................... 206 281
------ ------
911 1,047
Less accumulated depreciation................................... 541 611
------ ------
370 436
------ ------
$5,761 $6,784
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities
Notes payable to related parties (Note 3)....................... $ 497 $ 555
Current maturities of long-term debt............................ 101 84
Accounts payable................................................ 2,167 2,451
Accrued expenses................................................ 205 380
Deferred taxes (Note 4)......................................... 100 --
Income taxes payable............................................ 588 1,015
------ ------
Total current liabilities..................................... 3,658 4,485
------ ------
Long-Term Debt, less current maturities (Note 2).................. 56 69
------ ------
Deferred Taxes (Note 4)........................................... 10 13
------ ------

Commitments and Contingencies (Notes 5 and 8)

Stockholders' Equity (Note 6)
Preferred stock................................................. 295 295
Class A common stock............................................ 1 1
Class B common stock............................................ 10 10
Retained earnings............................................... 1,731 1,911
------ ------
2,037 2,217
------ ------
$5,761 $6,784
====== ======

See Notes to Financial Statements.

F-85

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TRUCKPARTS, INC.

STATEMENTS OF INCOME

Years Ended September 30, 1997 and 1998
(In thousands)

[Download Table]

1997 1998
------- -------

Net sales (Note 7)............................................ $13,204 $13,460
Cost of goods sold............................................ 9,455 9,093
------- -------
Gross profit.............................................. 3,749 4,367
Operating expenses (Note 3)................................... 3,324 3,703
------- -------
Operating income.......................................... 425 664
------- -------
Nonoperating income (expense):
Interest income............................................. 14 17
Gain on sale of equipment................................... 5 7
Interest expense (Note 3)................................... (48) (62)
------- -------
(29) (38)
------- -------
Income before income taxes................................ 396 626
------- -------
Provision for income taxes (Note 4):
Currently payable........................................... 178 621
Deferred.................................................... (13) (175)
------- -------
165 446
------- -------
Net income................................................ $ 231 $ 180
======= =======

STATEMENTS OF RETAINED EARNINGS

Years Ended September 30, 1997 and 1998
(In thousands)

[Download Table]

1997 1998
------ ------

Balance, beginning (Note 9)...................................... $1,500 $1,731
Net income..................................................... 231 180
------ ------
Balance, ending.................................................. $1,731 $1,911
====== ======

See Notes to Financial Statements.

F-86

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TRUCKPARTS, INC.

STATEMENTS OF CASH FLOWS

Years Ended September 30, 1997 and 1998
(In thousands)

[Download Table]

1997 1998
----- -----

Cash Flows From Operating Activities
Net income..................................................... $ 231 $ 180
Adjustments to reconcile net income to net cash provided by
(used in)
operating activities:
Gain on sale of equipment.................................... (5) (7)
Depreciation................................................. 94 121
Deferred taxes............................................... (13) (175)
Changes in assets and liabilities:
Trade receivables.......................................... (155) (107)
Vendor receivables......................................... (111) 22
Inventories................................................ (271) (348)
Other assets............................................... 13 --
Accounts payable........................................... 13 284
Accrued expenses........................................... 16 175
Income taxes payable....................................... 73 427
----- -----
Net cash provided by (used in) operating activities...... (115) 572
----- -----
Cash Flows From Investing Activities
Purchase of equipment.......................................... (154) (195)
Proceeds from disposal of equipment............................ 22 15
----- -----
Net cash used in investing activities.................... (132) (180)
----- -----
Cash Flows From Financing Activities
Principal payments on long-term debt........................... (97) (123)
Borrowings on long-term debt................................... 421 177
----- -----
Net cash provided by financing activities................ 324 54
----- -----
Increase in cash and cash equivalents.................... 77 446
Cash and Cash Equivalents
Beginning...................................................... 57 134
----- -----
Ending......................................................... $ 134 $ 580
===== =====
Supplemental Disclosures of Cash Flow Information
Cash payments for interest..................................... $ 48 $ 62
Cash payments for income taxes................................. 108 208
===== =====

See Notes to Financial Statements.

F-87

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TRUCKPARTS, INC.

NOTES TO FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Data)

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: The Company is a distributor of motor vehicle parts. The
Company operates out of four locations in Connecticut. The Company sells its
products primarily to customers in the United States on credit terms that the
Company establishes for its customers.

A summary of the Company's significant accounting policies follows:

Inventories: Inventories are stated at the lower of cost (first in, first out
method) or market, and are comprised solely of purchased goods.

Depreciation: Depreciation is computed over the estimated useful lives of the
respective assets using accelerated methods. The estimated useful lives by
class are as follows:

[Download Table]

Years
-----

Transportation equipment............................................... 3-5
Furniture and fixtures................................................. 3-7
Leasehold improvements................................................. 8-10

Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.

Segment information: In June 1998, the FASB issued SFAS Statement No 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement, effective for financial

F-88

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TRUCKPARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share and Per Share Data)

Note 2. Long-Term Debt

Long-term debt: Long-term debt consists of several capitalized leases with
various monthly installments and interest rates ranging from 4.8 to 11.0
percent. The leases mature at various dates through September 2001, and are
secured by transportation equipment.

Aggregate maturities on capital lease obligations at September 30, 1998, are
as follows:

[Download Table]

Capital Leases
-------------------------------------------
Total Minimum Less Amount Present Value of
Lease Representing Net Minimum
Payments Interest Lease Payments
------------- ------------ ----------------

Years ending September 30:
1999......................... $ 91 $ 7 $ 84
2000......................... 55 2 52
2001......................... 17 1 17
---- --- ----
$163 $10 $153
==== === ====

Subsequent to September 30, 1998, approximately $73 of these leases were paid
in full.

Note 3. Related-Party Transactions and Leasing Arrangements

The Company has two notes payable with related parties which were paid in
full subsequent to year end. Interest expense relating to these notes payable
was $29 and $48 the years ended September 30, 1997 and 1998, respectively.

One note was unsecured and accrued interest at 10 percent. The other note was
secured by computer equipment and accrued interest at 8.75 percent.

F-89

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TRUCKPARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share and Per Share Data)

The Company leases vehicles, buildings, and property from related and
unrelated parties, under operating leases, requiring various monthly payments.
The leases expire at various dates through September 2008. Certain of these
leases include an additional annual payment for property taxes.

Future minimum lease payments on operating lease commitments at September 30,
1998, are as follows:

[Download Table]

Related Unrelated
Parties Parties Total
------- --------- ------

1999................................................ $ 250 $110 $ 360
2000................................................ 250 92 342
2001................................................ 253 43 296
2002................................................ 275 -- 275
2003................................................ 277 -- 277
Thereafter.......................................... 1,090 -- 1,090
------ ---- ------
$2,395 $245 $2,640
====== ==== ======

Rent expense was approximately $273 and $297 in 1997 and 1998, respectively,
including $197 and $212, respectively, to related parties.

Note 4. Income Taxes

The components of income tax expense charged to operations for the years
ended September 30, 1997 and 1998, are as follows:

[Download Table]

1997 1998
---- -----

Current tax expense:
Federal....................................................... $132 $ 477
State......................................................... 46 144
Deferred tax benefit............................................ (13) (175)
---- -----
$165 $ 446
==== =====

The Company's income tax expense varies from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax income for
the years ended September 30, 1997 and 1998, due to the following:

[Download Table]

1997 1998
---- ----

Computed "expected" tax expense.................................. $134 $213
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit..................... 32 50
Nontaxable items............................................... 4 7
Nondeductible interest and underpayment penalties.............. (5) 176
---- ----
$165 $446
==== ====

F-90

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TRUCKPARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share and Per Share Data)

Net deferred tax assets consisted of the following components as of September
30, 1997 and 1998:

[Download Table]

1997 1998
----- -----

Deferred tax assets:
Allowance for doubtful accounts.............................. $ 19 $ 20
Accrued compensation and other............................... 21 95
Inventory reserve............................................ 42 123
----- -----
82 238
----- -----
Deferred tax liabilities:
Depreciation................................................. (10) (13)
Rebates receivable........................................... (182) (160)
----- -----
(192) (173)
----- -----
$(110) $ 65
===== =====

The Company's deferred tax amounts have been classified in the accompanying
financial statements as follows:

[Download Table]

1997 1998
----- -----

Current assets................................................. $ 82 $ 238
Current liabilities............................................ (182) (160)
----- -----
Net current asset (liability).................................. (100) 78
Noncurrent liabilities......................................... (10) (13)
----- -----
$(110) $ 65
===== =====

Note 5. Commitments and Contingencies

Profit sharing: The Company maintains a 401(k) profit sharing plan for
eligible employees. Under the terms of the plan, employees may contribute up to
the maximum allowed by the IRS. The Company can make discretionary matching
contributions. No discretionary contributions were made to the plan during 1997
or 1998.

Pension plan: The Company maintains a defined contribution pension plan for
eligible employees. Under the terms of the plan, employees may contribute up to
10 percent of their compensation. The Company can make discretionary
contributions to the plan. Company contributions to the plan for the years
ended September 30, 1997 and 1998, were $117 and $143, respectively.

Note 6. Components of Stockholders' Equity

The Company has authorized the issuance of 2,000 shares of 6 percent
noncumulative, nonparticipating, nonvoting preferred stock, with a par value of
$500 per share. The Company has issued 590 shares of preferred stock, which is
entitled to dividends of $30 per share before any dividends are paid on the
Class A common stock of the Company. The preferred stock is callable at

F-91

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TRUCKPARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share and Per Share Data)

the option of the Company at $500 per share and is preferred in liquidation
over all share of Class A common stock and Class B common stock.

The Company has authorized the issuance of 2,000 shares of Class A voting
common stock, with a par value of $1 per share. The Company has issued 1,000
shares of Class A common stock which, after the dividend preference of the
preferred stock and the Class B common stock, can participate in dividends as
described below.

In addition, the Company has authorized the issuance of 1,000 shares of Class
B voting common stock, with a par value of $100 per share. The Company has
issued 100 shares of Class B common stock, which is entitled to dividends of
$50 per share before any dividends are paid on preferred stock or Class A
common stock. After dividends are paid on the Class B common stock and
preferred stock, the Class B common stock can participate in further dividends
jointly with the Class A common stock in proportion with their respective par
values.

The Class B common stock and Class A common stock shall participate in
liquidation in accordance with their respective par values after the
liquidation preference of the preferred stock.

Note 7. Major Customers

Trade receivables and sales as of and for the years ended September 30, 1997
and 1998, included amounts to a major customer. Sales to this customer were
approximately 17 and 10 percent of total sales in 1997 and 1998, respectively.
Accounts receivable from this customer as of September 30, 1998, were
approximately $25.

Note 8. Stock Purchase Agreement

On December 17, 1998, the shareholders of Truckparts, Inc. entered into a
stock purchase agreement (the Agreement) with HDA Parts System, Inc. (HDA) to
sell all of the outstanding stock of the Company for a purchase price of
$11,700, less the outstanding balance of the related-party note payable
outstanding at the date of closing, plus certain shares of common and preferred
stock of an entity controlled by HDA. Under the terms of the Agreement, the
notes payable to related parties (see Note 3) were paid in full.

In connection with the Agreement, HDA also entered into three-year employment
agreements and five-year noncompete agreements with two shareholders of
Truckparts, Inc. In addition, HDA entered into a consulting agreement whereby
the consultant will be paid $56 per year for two years.

Note 9. Prior-Period Adjustment

The financial statements as presented include prior-period adjustments for
inventory, accounts receivable, vendor receivables, and accrued expenses. The
gross effect on retained earnings at October 1, 1996, and net income for the
year ended September 30, 1997, was approximately $1,240. The effect on retained
earnings at October 1, 1996, and net income for 1997, net of tax, was
approximately $617.

F-92

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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
HDA Parts System, Inc.
Chicago, Illinois

We have audited the accompanying combined balance sheet of Tisco, Inc. and
Tisco of Redding, Inc. as of September 30, 1998, and the related combined
statements of income, stockholders' equity, and cash flows for the year then
ended. The financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Tisco,
Inc. and Tisco of Redding, Inc. as of September 30, 1998, and the results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.

/s/ McGladrey & Pullen, LLP

Minneapolis, Minnesota
December 12, 1998

F-93

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TISCO, INC. AND TISCO OF REDDING, INC.

COMBINED BALANCE SHEET

September 30, 1998
(In thousands)

[Download Table]

ASSETS (Note 2)
---------------

Current Assets
Cash.................................................................. $ 355
Receivables:
Trade accounts, less allowance for doubtful accounts of $31......... 976
Vendor rebates (Note 1)............................................. 324
Inventories........................................................... 2,300
Prepaid expenses...................................................... 11
------
Total current assets.............................................. 3,966
------
Other Assets............................................................ 89
------
Property and Equipment
Transportation equipment.............................................. 258
Equipment............................................................. 201
Furnitures and fixtures............................................... 88
Leasehold improvements................................................ 5
------
552
Less accumulated depreciation......................................... 423
------
129
------
$4,184
======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities
Current maturities of long-term debt (Note 2)......................... $ 49
Accounts payable...................................................... 879
Accrued expenses:
Compensation and employee benefits.................................. 44
Profit sharing contribution (Note 4)................................ 47
Sales tax........................................................... 55
Other............................................................... 68
------
Total current liabilities......................................... 1,142
------
Long-Term Debt, less current maturities (Note 2)........................ 262
------

Commitments and Contingencies (Notes 2, 3, and 6)

Stockholders' Equity
Common stock (Note 5)............................................... 109
Unearned compensation............................................... (37)
Retained earnings................................................... 2,708
------
2,780
------
$4,184
======

See Notes to Combined Financial Statements.

F-94

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TISCO, INC. AND TISCO OF REDDING, INC.

COMBINED STATEMENT OF INCOME

Year Ended September 30, 1998
(In thousands)

[Download Table]

Net sales............................................................... $8,641
Cost of sales........................................................... 6,146
------
Gross profit........................................................ 2,495
Operating expenses...................................................... 1,492
------
Operating income.................................................... 1,003
Nonoperating income (expense):
Interest expense (Note 2)............................................. (17)
Gain on sale of property and equipment................................ 1
------
Income before income taxes.......................................... 987
Provision for state income taxes........................................ 21
------
Net income.......................................................... $ 966
======

See Notes to Combined Financial Statements.

F-95

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TISCO, INC. AND TISCO OF REDDING, INC.

COMBINED STATEMENT OF STOCKHOLDERS' EQUITY

Year Ended September 30, 1998
(In thousands)

[Download Table]

Common Unearned Retained
Stock Compensation Earnings Total
------ ------------ -------- ------

Balance, September 30, 1997 $109 $ (50) $2,064 $2,123
Net income............................... -- -- 966 966
Amortization of unearned compensation.... -- 13 -- 13
Distributions to stockholders............ -- -- (322) (322)
---- ----- ------ ------
Balance, September 30, 1998 $109 $ (37) $2,708 $2,780
==== ===== ====== ======

See Notes to Combined Financial Statements.

F-96

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TISCO, INC. AND TISCO OF REDDING, INC.

COMBINED STATEMENT OF CASH FLOWS

Year Ended September 30, 1998
(In thousands)

[Download Table]

Cash Flows From Operating Activities
Net income............................................................ $ 966
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 67
Deferred compensation............................................... 13
Gain on sale of property and equipment.............................. (1)
Changes in current assets and liabilities:
Receivables....................................................... (400)
Inventories....................................................... (731)
Prepaid expenses and other assets................................. 14
Accounts payable.................................................. 240
Accrued expenses.................................................. 99
-----
Net cash provided by operating activities....................... 267
-----
Cash Flows From Investing Activities
Purchases of property and equipment................................... (28)
Proceeds from sale of equipment....................................... 2
-----
Net cash used in investing activities........................... (26)
-----
Cash Flows From Financing Activities
Proceeds from long-term borrowings.................................... 250
Principal payments on long-term borrowings............................ (55)
Distributions to stockholders......................................... (323)
-----
Net cash used in financing activities........................... (128)
-----
Net increase in cash............................................ 113
Cash
Beginning............................................................. 242
-----
Ending................................................................ $ 355
-----
Supplemental Disclosure of Cash Flow Information
Cash payments for interest............................................ $ 13
Cash payments for state income taxes.................................. 4
=====
Supplemental Schedule of Noncash Investing and Financing Activities
Assets acquired under capital lease obligations....................... $ 26
=====

See Notes to Combined Financial Statements.

F-97

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(In Thousands, Except Share Data)

Note 1. Nature of Business and Significant Accounting Policies

Nature of business: Tisco, Inc. and Tisco of Redding, Inc. (together referred
to herein as the Companies) are distributors of motor vehicle parts and operate
out of four locations in northern California. The Companies sell their products
primarily to customers in the United States on credit terms established for its
customers on an individual and industry practice basis.

A summary of the Companies' significant accounting policies follows:

Principles of combination: The accompanying combined financial statements
include the accounts of Tisco, Inc. and Tisco of Redding, Inc., which are
related through common ownership. Management has elected to reflect these
financial statements as combined for the period presented. All material,
intercompany balances and transactions have been eliminated in combination.

Cash: The Companies maintain cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Companies have not experienced any
losses in such accounts.

Vendor rebates receivables: The vendor rebate receivables consist primarily
of rebates to be received from vendors for meeting certain purchase levels. The
receivable represents management's estimate of rebates to be received based on
purchasing activity calculated by rates included in the rebate agreements.

Inventories: Inventories are stated at the lower of cost (first in, first out
method) or market, and are comprised solely of purchased parts.

Property and equipment: Property and equipment are recorded at cost.
Depreciation is computed over the estimated useful lives of the respective
assets using straight-line and accelerated methods. The estimated useful lives
by class are as follows:

[Download Table]

Years
-----

Transportation equipment............................................... 5-7
Equipment, furniture and fixtures...................................... 5-7
Leasehold improvements................................................. 39

Income taxes: The Companies have elected to be taxed for federal and state
income tax purposes as an S Corporation. Under these provisions, the
stockholders' share in the net income of the Companies is reportable on their
individual tax returns. Therefore, these statements do not include any
provision for federal corporation income taxes and as the section of the
California tax law requires, the state income taxes are at a reduced rate. The
Companies intend to make distributions to the stockholders in amounts that will
at least allow them to pay the personal income taxes on the taxable income of
the Companies.

F-98

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share Data)

Segment information: In June 1998, the FASB issued SFAS Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement, effective for financial statements for fiscal years beginning after
December 15, 1997, requires that a public business enterprise report financial
and descriptive information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. Based on this criteria, the Company has determined that
it operates in one business segment, that being the distribution of heavy duty
vehicle parts in the United States. Thus, all information required by SFAS No.
131 is included in the Company's financial statements.

Note 2. Line of Credit and Long-Term Debt

Line of credit: The Companies combined have a $400 working capital agreement
with a financial institution. The borrowings bear interest at the prime rate
plus 1 percent (9.5 percent at September 30, 1998) and are secured by
substantially all of the Companies' assets and the guarantee of the Companies'
majority shareholder. The agreement expires in January 1999. There were no
outstanding borrowings under the line of credit at September 30, 1998.

Long-term debt: Long-term debt consists of the following at September 30,
1998:

[Download Table]

Tisco of
Tisco, Inc. Redding, Inc. Total
----------- ------------- -----

Note payable, bearing interest at 7%, due
in monthly payments of $3, including
interest, through March, 2008, guaranteed
by the Companies' majority stockholder and
secured by certain assets of the
stockholder............................... $246 $-- $246
Capital leases, finance company, bearing
interest of 7.9% to 10.0%, due in varying
monthly payments, including interest,
through January 2002, secured by
transportation equipment.................. 39 20 59
Other...................................... 4 2 6
---- ---- ----
289 22 311
Less current portion....................... (42) (7) (49)
---- ---- ----
$247 $ 15 $262
==== ==== ====

F-99

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share Data)

The approximate aggregate annual maturities are as follows:

[Download Table]

Years ending September 30:
1999................................................................ $ 49
2000................................................................ 40
2001................................................................ 35
2002................................................................ 30
2003................................................................ 27
Thereafter.......................................................... 130
----
$311
====

Minimum future lease obligations under these leases at September 30, 1998,
are as follows:

[Download Table]

Years ending September 30:
1999.................................................................. $25
2000.................................................................. 22
2001.................................................................. 14
2002.................................................................. 6
---
Total minimum lease payments............................................ 67
Less amounts represent interest......................................... (8)
---
$59
===

Note 3. Related-Party Transactions and Leasing Arrangements

Debt guarantee: The Companies have guaranteed payment of a stockholder note
payable with a financial institution. The outstanding balance of the note at
September 30, 1998, was approximately $44. All payments are current.

Property leases: The Companies lease space on a month-to-month basis pursuant
to four operating leases, requiring various monthly payments. Three leases are
with related parties. Rent expense was approximately $100 in 1998, including
$75 to related parties.

Note 4. Profit Sharing and Money Purchase Plan

The Companies maintain a profit sharing plan and a money purchase plan for
eligible employees. Under the terms of the profit sharing plan the Companies
can make discretionary contributions. The money purchase plan requires a
minimum contribution equal to 6 percent of each participant's total
compensation plus 5.7 percent of each participant's compensation for the plan
year in excess of the 100 percent of the taxable wage base in effect on the
first day of the plan year. No employee contributions are allowed under the
plans. The Companies' contributions to the plans for the year ended September
30, 1998, were $47.

F-100

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands, Except Share Data)

Note 5. Stockholders' Equity

Common stock: Common stock consists of the following at September 30, 1998:

[Download Table]

Common
Stock
------

Tisco, Inc. 100,000 shares authorized; no par value; 25,000 shares
issued and outstanding; stated at ........................... $ 9
Tisco of Redding, Inc. 500,000 shares authorized; no par value; 127
shares issued and outstanding, stated at .................... 100
----
$109
====

Stock bonus plan: One of the Companies adopted a stock bonus plan on January
1, 1995. Under this plan, a restricted stock award of common stock was made to
an employee. The fair market value of these shares was determined to be $84.

The stock award is vesting over seven years, as long as the employee
continues employment with the Company. The resulting amortization of unearned
compensation recognized for the year ended September 30, 1998, was $12.

Note 6. Stock Purchase Agreement

Subsequent to September 30, 1998, the shareholders of the Companies entered
into a stock purchase agreement (the Agreement) with HDA Parts System, Inc.
(HDA) to sell all of the outstanding stock of the Companies. Terms of the
Agreement provide, in part, the following:

. Stock purchase price of $5,750 in cash plus common and preferred stock
of City Holdings, Inc., an HDA-controlled entity.

. Three (3) year noncompete agreements with the two officer/shareholders
of the Companies.

. The guaranteed note payable (Note 3) will be paid in full and the
unearned compensation of $37 relating to the 1995 stock bonus plan (Note
5) will be fully vested.

F-101

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TISCO, INC. AND TISCO OF REDDING, INC.

UNAUDITED COMBINED STATEMENT OF INCOME

For the Three Months Ended December 31, 1998
(In thousands)

[Download Table]

Net sales............................................................... $2,152
Cost of sales........................................................... 1,563
------
Gross profit........................................................ 589
Operating expenses...................................................... 389
------
Operating income.................................................... 200
Nonoperating income:
Interest income ...................................................... 1
------
Income before income taxes.......................................... 201
Provision for state income taxes........................................ --
------
Net income and comprehensive income................................. $ 201
======

See Notes to Combined Financial Statements.

F-102

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TISCO, INC. AND TISCO OF REDDING, INC.

UNAUDITED COMBINED STATEMENT OF CASH FLOWS

For the Three Months Ended December 31, 1998
(In thousands)

[Download Table]

Cash Flows From Operating Activities
Net income and comprehensive income.................................... $201
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization........................................ 3
Changes in current assets and liabilities:
Receivables........................................................ (158)
Inventories........................................................ 92
Prepaid expenses and other assets.................................. (65)
Accounts payable................................................... (264)
Accrued expenses................................................... 28
----
Net cash used in operating activities............................ (163)
----
Cash Flows From Investing Activities
Purchases of property and equipment.................................... (11)
----
Net cash used in investing activities............................ (11)
----
Cash Flows From Financing Activities
Principal payments on long-term borrowings............................. (15)
----
Net cash used in financing activities............................ (15)
----
Net decrease in cash............................................. (189)
Cash
Beginning.............................................................. 355
----
Ending................................................................. $166
----

See Notes to Combined Financial Statements.

F-103

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
(In Thousands)

Note 1. Nature of Business and Significant Accounting Policies

Nature of business and basis of presentation: Tisco, Inc. and Tisco of
Redding, Inc. (together referred to herein as the Companies) are distributors
of motor vehicle parts and operate out of four locations in northern
California. The Companies sell their products primarily to customers in the
United States on credit terms established for its customers on an individual
and industry practice basis.

A summary of the Companies' significant accounting policies follows:

Cash: The Companies maintain cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Companies have not experienced any
losses in such accounts.

Inventories: Inventories are stated at the lower of cost (first in, first out
method) or market, and are comprised solely of purchased parts.

[Download Table]

Years
-----

F-104

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TISCO, INC. AND TISCO OF REDDING, INC.

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(In Thousands)

include any provision for federal corporation income taxes and as the section
of the California tax law requires, the state income taxes are at a reduced
rate. The Companies intend to make distributions to the stockholders in amounts
that will at least allow them to pay the personal income taxes on the taxable
income of the Companies.

Note 2. Subsequent events

On January 12, 1999, HDA Parts System, Inc. purchased the Company. This was
accounted for as a purchase. The unaudited financial statements have not been
effected by this transaction.

F-105

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Member of
Active Gear, L.L.C.

In our opinion, the accompanying balance sheets and the related statements of
operations and member's equity, and cash flows present fairly, in all material
respects, the financial position of Active Gear, L.L.C. (the "Company") at
December 31, 1997 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

September 10, 1999
Chicago, Illinois

F-106

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ACTIVE GEAR, L.L.C.

BALANCE SHEETS
at December 31, 1997 and 1998
(amounts in thousands)

[Download Table]

1997 1998
------ ------

ASSETS
------
Current assets:
Cash........................................................... $ 44 $ 32
Accounts receivable, net of allowance for doubtful accounts of
$0 and $10.................................................... 658 725
Inventories.................................................... 2,521 2,897
Prepaid expenses............................................... 5 6
------ ------
Total current assets......................................... 3,228 3,660
------ ------
Property and equipment........................................... 333 345
------ ------
Total assets................................................. $3,561 $4,005
====== ======
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
Current Liabilities:
Cash overdraft................................................. $ 271 $ 232
Current portion of long-term debt.............................. 33 28
Short-term bank borrowing...................................... 585 590
Accounts payable............................................... 394 486
Accrued expenses............................................... 128 139
Notes payable, related parties................................. 1,518 1,331
------ ------
Total current liabilities.................................... 2,929 2,806
------ ------
Long-term debt, net of current portion........................... 40 12
------ ------
Total liabilities............................................ 2,969 2,818
------ ------
Member's equity.................................................. 592 1,187
------ ------
Total liabilities and member's equity........................ $3,561 $4,005
====== ======

The accompanying notes are an integral part of these financial statements.

F-107

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ACTIVE GEAR, L.L.C.

STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY
For the years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------ ------

Sales................................................... $8,445 $7,148 $7,922
Cost of sales........................................... 6,293 5,003 5,197
------ ------ ------
Gross profit.......................................... 2,152 2,145 2,725
------ ------ ------
Operating expenses
Selling, general, and administrative expenses......... 1,345 1,623 1,811
Depreciation and amortization......................... 62 73 75
------ ------ ------
1,407 1,696 1,886
Income from operations.................................. 745 449 839
------ ------ ------
Other income (expenses):
Interest income....................................... 2 -- --
Other income.......................................... 49 3 --
Rental income......................................... 13 13 14
Interest expense...................................... (33) (77) (62)
Interest expense-related parties...................... (153) (139) (129)
------ ------ ------
(122) (200) (177)
------ ------ ------
Net income and comprehensive income..................... 623 249 662
------ ------ ------
Member's beginning equity............................... (161) 428 592
Distributions........................................... (34) (85) (67)
------ ------ ------
Member's ending equity.................................. $ 428 $ 592 $1,187
====== ====== ======

The accompanying notes are an integral part of these financial statements.

F-108

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ACTIVE GEAR, L.L.C.

STATEMENT OF CASH FLOWS
For the years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ----- -----

Cash flows from operating activities:
Net income and comprehensive income.................... $ 623 $ 249 $ 662
Adjustments to reconcile net income to net cash
provided in operating activities:
Depreciation and amortization........................ 62 73 75
(Gain) on disposition of assets...................... -- (3) --
(Increase) decrease in operating assets and
liabilities
Accounts receivable.................................. 37 (50) (67)
Inventories.......................................... (706) (406) (376)
Prepaid expenses..................................... 2 (1) (1)
Accounts payable..................................... (223) 146 92
Accrued expenses..................................... 1 32 11
------ ----- -----
Net cash provided (used) by operating activities... (204) 40 396
------ ----- -----
Cash flows from investing activities:
Purchases of property and equipment.................... (79) (150) (87)
Proceeds from sale of property and equipment........... -- 16 --
------ ----- -----
Net cash used by investing activities.................. (79) (134) (87)
------ ----- -----
Cash flows from financing activities:
Increase(decrease) in cash overdraft................... 173 (31) (39)
Payments on note payable, bank......................... (920) -- --
Proceeds from note payable, bank....................... -- 325 5
Payments on long-term debt............................. (16) -- (33)
Proceeds from long-term debt........................... -- 9 --
Payments on note payable, related parties.............. -- (82) (187)
Proceeds from note payable, related parties............ 1,081 -- --
Distributions to members............................... (34) (85) (67)
------ ----- -----
Net cash provided (used) by financing activities..... 284 136 (321)
------ ----- -----
Net change in cash....................................... 1 42 (12)
Cash at beginning of year................................ 1 2 44
------ ----- -----
Cash at end of year...................................... $ 2 $ 44 $ 32
====== ===== =====
Supplemental disclosures of cash flow information:
Cash paid for interest............................... $ 186 $ 217 $ 191
====== ===== =====

The accompanying notes are an integral part of these financial statements.

F-109

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ACTIVE GEAR, L.L.C.

NOTES TO FINANCIAL STATEMENTS
(amounts in thousands)

1. Nature of Business

Nature of Business

Active Gear, L.L.C. (the "Company") was incorporated in the State of
Washington in March 1995 as a Limited Liability Company. The Company sells
truck gears, units and component parts and rebuilds units for sale to both
retail and wholesale customers

2. Summary of Significant Accounting Policies

Inventory

Inventory consists of truck parts and cores and is valued at the lower of
cost or market. Cost is determined on the weighted average cost method.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization which is calculated on a straight-line basis. Equipment is
depreciated over the estimated useful lives which range from 4 to 10 years.
Leasehold improvements are depreciated over 10 years.

Income Taxes

The company is treated as a partnership for federal income tax purposes and
does not incur income taxes. Instead, its earnings and losses are included in
the personal returns of the members and taxed depending on their personal tax
situations. Accordingly, the financial statements do not reflect a provision
for income taxes.

Use of Estimates

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchange and "core" credits. Cores, which are reusable
components of originally purchased parts, may be exchanged for credit at the
time of sale of within a specified period. Returned cores are either returned
to the vendor for credit or remanufactured.

Cash and cash equivalents

Cash and equivalents represent cash and short-term, highly liquid investments
with original maturities three months or less.

F-110

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ACTIVE GEAR, L.L.C.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

3. Inventories

Inventories at December 31 consist of the following:

[Download Table]

1997 1998
------ ------

Part inventory................................................ $2,319 $2,727
Cores......................................................... 202 170
------ ------
$2,521 $2,897
====== ======

4. Property and Equipment

Property, plant and equipment at December 31 consists of the following:

1997 1998
------ ------

Office equipment.............................................. $ 116 $ 121
Machinery and equipment....................................... 171 236
Vehicles...................................................... 119 129
Leasehold improvements........................................ 94 102
------ ------
500 588
Less: accumulated depreciation................................ 167 243
------ ------
$ 333 $ 345
====== ======

5. Short Term Bank Borrowings

In October 1997 the Company obtained a $1.75 million bank credit facility for
letters of credit and an operating line of credit that matured in November
1998. The note was renewed in November 1998 and matures in October 2000, with
an adjusted limit of $2.0 million, and bearing interest at the bank's prime
rate, 9.00% and 7.75% at December 31, 1997 and 1998 respectively. At
December 31, 1997 and 1998, respectively, letters of credit outstanding totaled
$178 and $403, and borrowings under the line of credit totaled $585 and $590.
The credit facility is secured by the Company's trade receivables, inventory,
leaseholds and equipment and is personally guaranteed by the principle owner of
the Company. Covenants with the bank require minimum tangible net worth, as
defined, of the company of not less than $800.

F-111

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ACTIVE GEAR, L.L.C.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

6. Long-Term Debt and Capital Lease Obligations

A summary of long-term debt at December 31 is as follows:

[Download Table]

1997 1998
---- ----

Notes payable requiring monthly payments of $1 including interest
at 10.75%. Final payment due April 1999, collateralized by
transportation equipment......................................... $15 $ 4
Capitalized lease obligation requiring monthly lease payments of
$1 including interest at 14.9%. Final payment due March 2000,
collateralized by computer equipment............................. 31 21
Note payable requiring monthly payment of $1 including interest at
9.99%. Final payment due February 2000, collateralized by
automobile....................................................... 27 15
--- ---
73 40
Less current portion.............................................. 33 28
--- ---
$40 $12
=== ===

Principal payments required for future years ending December 31 are as
follows:

[Download Table]

1999..................................................................... $28
2000..................................................................... 12
---
$40
===

7. Leases

Future minimum lease payments for non-cancelable operating leases are as
follows:

[Download Table]

1999.................................................................... $134
2000.................................................................... 137
2001.................................................................... 139
2002.................................................................... 102
2003.................................................................... 25
Thereafter.............................................................. --
----
$537
====

The leases require payment of property taxes and operational expenses in
addition to base periodic rentals. The company has an option to renew the
Seattle store lease for an additional five year term when the current lease
expires in April 2003. Base rent for the option period will be negotiated at
the current market rate. The lease on the Tacoma store and yard expires in
December 2001. Total rent expense for operating leases, including rentals on
month-to-month leases was $115, $143, and $49 for the years ended December 31,
1996, 1997, 1998, respectively.

8. Related Party Transactions

The Company borrows from related parties that include the owners of the
Company, the owners' spouses, the owners' father's estate, and a trust for the
benefit of the owners' children. Notes payable to related parties at December
31, 1997 and 1998 were $1,518 and $1,331 respectively.

F-112

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ACTIVE GEAR, L.L.C.

NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

The notes are demand notes and are collateralized by accounts receivable,
inventory, equipment and general tangibles. The notes call for interest at the
Seafirst Bank reference rate plus, 9.00% and 7.75% at December 31,1997 and 1998
respectively. Interest paid by the Company during 1996, 1997, and 1998 on these
loans totaled $153, $139, and $129, respectively.

The Company rented the Tacoma store and yard, from the Members, for $2 per
month respectively in 1998. The lease expires in December 2001. Rents paid by
the Company to the Members during 1996, 1997, and 1998 totaled, $3, $28, and
$28, respectively.

9. Profit Sharing Plan

Substantially all employees of the Company are covered by the Company's
employee 401(k) profit sharing plan. The plan was established on March 10,
1995. The amount of the contributions is at the discretion of the Company. The
Company contributes 3% of eligible compensations. Employer contributions to the
401(k) profit sharing plan were $24, $29 and $34 in 1996, 1997 and 1998
respectively.

10. Subsequent Events

On April 20, 1999, the Company was acquired by HDA Parts System, Inc. This
was accounted for as a purchase. The financial statements have not been
effected by this transaction.

F-113

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ACTIVE GEAR, L.L.C.

UNAUDITED STATEMENTS OF OPERATIONS AND MEMBER'S EQUITY
For the Period from January 1, 1999 to April 20, 1999
(amounts in thousands)

[Download Table]

Sales................................................................... $2,466
Cost of sales........................................................... 1,551
------
Gross profit.......................................................... 915
------
Operating expenses
Selling, general, and administrative expenses......................... 746
Depreciation and amortization......................................... 25
------
771
Income from operations.................................................. 144
------
Other income (expenses):
Other income.......................................................... 1
Rental income......................................................... 3
Interest expense...................................................... (44)
------
(40)
------
Net income and comprehensive income..................................... 104
------
Member's beginning equity............................................... 1,187
Distributions........................................................... (85)
------
Member's ending equity.................................................. $1,206
======

The accompanying notes are an integral part of these financial statements.

F-114

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ACTIVE GEAR, L.L.C.

UNAUDITED STATEMENT OF CASH FLOWS
For the Period from January 1, 1999 to April 20, 1999
(amounts in thousands)

[Download Table]

Cash flows from operating activities:
Net income and comprehensive income................................... $ 104
Adjustments to reconcile net income to net cash provided in (used by)
operating activities:
Depreciation and amortization....................................... 25
(Increase) decrease in operating assets and liabilities
Accounts receivable................................................. (292)
Inventories......................................................... (68)
Prepaid expenses.................................................... (29)
Accounts payable.................................................... (45)
Accrued expenses.................................................... 62
-----
Net cash used by operating activities............................. (243)
-----
Cash flows from investing activities:
Purchases of property and equipment................................... (35)
-----
Net cash used by investing activities................................. (35)
-----
Cash flows from financing activities:
Increase(decrease) in cash overdraft.................................. (209)
Proceeds from note payable, bank...................................... 107
Proceeds from long-term debt.......................................... 5
Proceeds from note payable, related parties........................... 429
Distributions to members.............................................. (85)
-----
Net cash provided by financing activities........................... 247
-----
Net change in cash...................................................... (31)
Cash at beginning of year............................................... 32
-----
Cash at end of year..................................................... $ 1
=====
Supplemental disclosures of cash flow information:
Cash paid for interest.............................................. $ 44
=====

The accompanying notes are an integral part of these financial statements.

F-115

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ACTIVE GEAR, L.L.C.

UNAUDITED NOTES TO FINANCIAL STATEMENTS
(amounts in thousands)

1. Nature of Business and Basis of Presentation

Nature of Business

2. Summary of Significant Accounting Policies

Inventory

Inventory consists of truck parts and cores and is valued at the lower of
cost or market. Cost is determined on the weighted average cost method.

Property and Equipment

Income Taxes

Use of Estimates

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchange and "core" credits. Cores, which are reusable
components of originally purchased parts,

F-116

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ACTIVE GEAR, L.L.C.

UNAUDITED NOTES TO FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

may be exchanged for credit at the time of sale of within a specified period.
Returned cores are either returned to the vendor for credit or remanufactured.

Cash and cash equivalents

Cash and equivalents represent cash and short-term, highly liquid investments
with original maturities three months or less.

2. Subsequent Events

On April 20, 1999, the Company was acquired by HDA Parts System, Inc. This
was accounted for as a purchase. The unaudited financial statements have not
been effected by this transaction.

F-117

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders of
California Equipment Company and California Equipment of Sacramento

In our opinion, the accompanying combined balance sheets and the related
combined statements of income, stockholders' equity, and cash flows present
fairly, in all material respects, the financial position of California
Equipment Company and California Equipment Company of Sacramento (the
"Companies") at December 31, 1997 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Companies' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP
September 3, 1999
Chicago, Illinois

F-118

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

Combined Balance Sheets
At December 31, 1997 and 1998
(amounts in thousands)

[Download Table]

1997 1998
------ ------

ASSETS
------
Current assets:
Cash and cash equivalents.................................... $ 12 $ 55
Restricted cash.............................................. 142 122
Accounts receivable, net of allowance for doubtful accounts
of $45 in 1997 and
$56 in 1998................................................. 706 883
Current portion of patronage dividend receivable............. 186 122
Inventories.................................................. 2,025 1,761
Prepaid expenses and other current assets.................... 25 33
------ ------
Total current assets....................................... 3,096 2,976
Property and equipment, net.................................. 87 130
Long-term portion of patronage dividend receivable........... 52 65
Other assets................................................. 48 35
------ ------
Total assets............................................... $3,283 $3,206
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Cash overdraft............................................... $ 277 $ 162
Accounts payable............................................. 737 866
Current portion of long-term debt............................ 34 22
Other payables............................................... 39 45
Due to affiliate............................................. 1,048 1,079
Other accrued expenses and other liabilities................. 153 141
------ ------
Total current liabilities.................................. 2,288 2,315
Long-term debt................................................. 22 31
Other long-term payables....................................... 45 --
Stockholders' equity:
Common stock................................................. 162 162
Additional paid-in capital................................... 848 848
Retained earnings............................................ (82) (150)
------ ------
Total stockholders' equity................................. 928 860
------ ------
Total liabilities and stockholders' equity................. $3,283 $3,206
====== ======

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

COMBINED STATEMENTS OF INCOME
For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------ ------

Sales............................................... $6,644 $6,431 $6,409
Cost of sales....................................... 4,349 4,241 4,178
------ ------ ------
Gross profit........................................ 2,295 2,190 2,231
Operating expenses:
Selling, general, and administrative expenses..... 2,241 2,210 2,180
Depreciation and amortization..................... 53 56 55
------ ------ ------
2,294 2,266 2,235
Income (loss) from operations..................... 1 (76) (4)
Other income (expense):
Interest expense.................................. (114) (115) (102)
Other income, net................................. 72 9 38
------ ------ ------
(42) (106) (64)
Loss before income taxes.......................... (41) (182) (68)
Provision for income taxes.......................... -- -- --
------ ------ ------
Net loss and comprehensive loss................... $ (41) $ (182) $ (68)
====== ====== ======

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

COMBINED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------- ------- -----

Operating activities:
Net loss and comprehensive loss...................... $ (41) $ (182) $ (68)
Adjustments to net loss:
Depreciation and amortization...................... 53 56 55
Net loss (gain) on disposal of assets.............. 1 (4) (5)
Changes in operating assets and liabilities:
Restricted cash.................................... (52) (6) 20
Accounts receivable................................ 74 81 (177)
Patronage dividends receivable..................... 45 158 51
Inventories........................................ 107 (31) 264
Prepaid expenses and other current assets.......... (9) (9) (8)
Other assets....................................... 5 7 13
Accounts payable................................... 62 (124) 129
Other payables..................................... 44 (44) 6
Accrued expenses and other current liabilities..... (63) (27) (12)
Other long-term payables........................... 7 (39) (45)
------- ------- -----
Net cash provided by (used in) operating
activities...................................... 233 (164) 223
Investing activities:
Purchase of property and equipment................... (34) (16) (91)
Proceeds from sales of property and equipment........ -- 28 6
------- ------- -----
Net cash provided by (used in) investing
activities...................................... (34) 12 (85)
Financing activities:
Increase/(decrease) in cash overdraft................ (208) 254 (115)
Principal payments on line of credit................. (7,585) (6,577) --
Proceeds from line of credit......................... 7,627 6,517 --
Principal payments on notes payable.................. (37) (68) (33)
Proceeds from notes payable.......................... 15 -- 27
Principal payments on capital lease obligations...... (1) (4) (5)
Due to affiliate..................................... (7) 37 31
------- ------- -----
Net cash provided by (used in) financing
activities...................................... (196) 159 (95)
Net increase in cash and equivalents................... 3 7 43
Cash and equivalents, beginning of year................ 2 5 12
------- ------- -----
Cash and equivalents, end of year...................... $ 5 $ 12 $ 55
======= ======= =====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................... $ 105 $ 113 $ 101
Income taxes....................................... $ 2 $ 2 $ 2
Non-cash investing and financing activities:
Additions to property and equipment financed through
capital lease obligations........................... $ 16 $ 7 $ 8
Debt re-financed through affiliate (see Note 9)...... $ -- $ 865 $ --

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- -------- -------------

Balances at January 1, 1996........... $162 $848 $ 141 $1,151
Net loss and comprehensive loss....... -- -- (41) (41)
---- ---- ----- ------
Balance at December 31, 1996.......... 162 848 100 1,110
Net loss and comprehensive loss....... -- -- (182) (182)
---- ---- ----- ------
Balance at December 31, 1997.......... 162 848 (82) 928
Net loss and comprehensive loss....... -- -- (68) (68)
---- ---- ----- ------
Balance at December 31, 1998.......... $162 $848 $(150) $ 860
==== ==== ===== ======

The accompanying notes are an integral part of these financial statements.

F-122

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS
(amounts in thousands)

1. Description of the business and basis of presentation

California Equipment Company and California Equipment Company of Sacramento
(the "Companies") are distributors of truck parts and selected speciality
products throughout Northern California.

During the period from January 1, 1996 through December 31, 1998, the
Companies have been under the common ownership and control of management. The
combination of California Equipment Company and the California Equipment
Company of Sacramento has been accounted for in a manner similar to a pooling
of interests.

2. Summary of Significant Accounting Policies

Revenue recognition

Revenue is recognized when products are shipped. Sales of cores are recorded
net of exchanges and "core" credits. Cores, which are reusable components of
originally purchased parts, may be exchanged for credit at the time of sale or
within a specified period. Returned cores are returned to the vendor for
credit.

Use of estimates

Cash and cash equivalents

All highly liquid investments with an original maturity of three months or
less are considered to be cash equivalents. These amounts are stated at cost
which approximates fair value due to short-term nature of these investments.

Inventories

Inventories consist of truck parts and cores, which are valued at the lower
of cost or market. Cost is determined on the average cost method.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using straight-line and accelerated methods over the
estimated useful lives of the assets. Maintenance and repairs are charged to
operations as incurred.

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

The useful lives for property and equipment are as follows:

[Download Table]

Useful
life
---------

Leasehold improvements............................................. 10 years
Equipment, furniture, & fixtures................................... 5-7 years
Computer and data processing equipment............................. 5 years
Vehicles........................................................... 5 years

3. Restricted cash

The Companies receive patronage dividends from a cooperative with whom they
maintain a joint account. The cooperative has the right to offset these
funds against amounts owed if the Companies fail to meet their minimum
purchase obligations.

4. Inventories

Inventories consist of the following at December 31,

[Download Table]

1997 1998
------ ------

Parts inventory................................................ $1,504 $1,265
Cores.......................................................... 521 496
------ ------
$2,025 $1,761
====== ======

5. Property & equipment

Property and equipment consist of the following at December 31,

[Download Table]

1997 1998
------- -------

Leasehold improvement...................................... $ 51 $ 53
Machinery, equipment, furniture & fixtures................. 463 504
Computer and data processing equipment..................... 339 341
Vehicles................................................... 203 238
Equipment under capital leases............................. 38 46
------- -------
1,094 1,182
Less: accumulated depreciation............................. (1,007) (1,052)
------- -------
$ 87 $ 130
======= =======

F-124

424B3 254th Page of 423 TOC 1st Previous Next ↓Bottom Just 254th
CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

6. Long-term debt

At December 31, the Companies were obligated under notes payable and other
financing arrangements as follows:

[Download Table]

1997 1998
---- ----

Notes payable with a credit company, collateralized by certain
vehicles; due in monthly installments ranging from $0.2 to $0.8
inclusive of interest at fixed rates ranging from 0.9% to 9.75%;
maturing September 1998 to May 2002.............................. $25 $30
Note payable to a former employee, due in monthly installments of
$1, inclusive of interest at a fixed rate of 10%; maturing
February 1999.................................................... 13 2
Obligations under capital leases (See Note 7)..................... 18 21
--- ---
56 53
Less: current maturities.......................................... 34 22
--- ---
$22 $31
=== ===

The aggregate maturities of debt as of December 31, 1998 are as follows:

[Download Table]

Year ending December 31,
------------------------

1999............................................................... $22
2000............................................................... 16
2001............................................................... 13
2002............................................................... 2
---
$53
===

7. Operating leases and capital lease obligations and commitments

The Companies lease certain equipment under agreements which are classified
as capital leases. The net balance of property and equipment at December 31,
1997 and 1998 under capital leases is as follows:

[Download Table]

1997 1998
---- ----

Gross amount under capital lease................................. $ 38 $ 46
Less accumulated depreciation.................................... (24) (32)
---- ----
$ 14 $ 14
==== ====

The Companies lease office space and warehouse facilities under six operating
lease agreements with terms of one month to seven years and expiring through
September 2003. The facilities have fixed rental payments for the term of the
leases. Total rental expense for the operating leases is $341, $299, and $304
for each of the three years ended December 31, 1998, respectively.

F-125

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Future minimum lease payments for non-cancellable operating leases and
capital lease obligations are as follows:

[Download Table]

Capital Operating
Year ending December 31, leases leases
------------------------ ------- ---------

1999....................................................... $ 8 $ 298
2000....................................................... 8 298
2001....................................................... 6 298
2002....................................................... -- 298
2003....................................................... -- 225
--- ------
Total minimum lease payments............................... 22 $1,417
--- ======
Less amounts representing interest......................... (2)
---
Present value of minimum lease payments.................... $20
===

8. Profit sharing plan

The Companies have a defined contribution plan for all eligible employees.
Contributions are discretionary and determined annually by the Board of
Directors of the respective companies. No contributions were made in each of
the three years ended December 31, 1998.

9. Related party transactions

Effective November 27, 1997, the Companies entered into a re-financing
agreement with a new lending agent. Prior to the re-financing, the Companies
held debt of $853 under a $1.25 million revolving credit facility and $12 under
a note payable jointly with its affiliate, Milligan-Spika Company. The
Milligan-Spika Company is held under common ownership and control with
California Equipment Company and California Equipment Company of Sacramento.
These debts were held in their entirety on the Companies' financial statements.

Subsequent to the refinancing, the Milligan-Spika Company retained primary
title to the debts of $617 under a $1.0 million revolving credit facility and
$250 under a note payable. However, the Companies continued to have use of the
credit facility and proceeds from the note payable through the year ending
December 31, 1998. Net borrowings and repayments are recorded in the due to
affiliate balance sheet account. As discussed in Note 12, California Equipment
Company and California Equipment Company of Sacramento have placed an
unconditional guarantee on these debts. Additionally, the Milligan-Spika
Company has charged the Companies interest expense relating to this debt of $7
and $97 for each of the two years ending December 31, 1998, respectively.

The Companies share facilities and common corporate and administrative
services with Milligan-Spika Company, a company held under common ownership and
control. These corporate general and administrative expenses have been
allocated to the Companies and Milligan-Spika Company using various management
assumptions. These expenses are not necessarily indicative of, and it is not
practicable for management to estimate, the nature and level of expenses which
might have been incurred had the Companies operated separately of Milligan-
Spika Company.

F-126

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

The Companies made purchases, at cost, totalling $10, $20, and $38 for each
of the three years ended December 31, 1998, respectively from its affiliate,
the Milligan-Spika Company.

The Companies also share a joint bank account with Milligan-Spika Company.
All cash has been included on the Companies' financial statements with the net
transactions to and from the Milligan-Spika Company recorded in due to
affiliate balance sheet account.

The Companies lease facilities under various operating leases from a
corporation owned by a stockholder of the Companies. The leases provide for
fixed rates and that the lessee pay expenses related to the properties,
primarily property taxes. The leases all expire in September 2003. Rent expense
on the leases amounted to $283, $271, and $277 for each of the three years
ended December 31, 1998, respectively.

10. Income taxes

The Companies file separate Federal and State tax returns and must elect to
apportion surtax exemptions and other tax benefits.

The components of the provision for income taxes from continuing operations
are:

[Download Table]

1996 1997 1998
---- ---- ----

Deferred income taxes:
Federal.................................................. $ 12 $ 57 $ 21
State.................................................... 4 16 7
Change in valuation allowance............................ (16) (73) (28)
---- ---- ----
$ -- $ -- $ --
==== ==== ====

The provision for income taxes differed from the United States statutory rate
for each of the three years ended December 31, 1998 for the following reasons:

[Download Table]

1996 1997 1998
---- ---- ----

Statutory tax rate......................................... $ 14 $ 62 $ 24
State and local taxes, net of federal benefits............. 2 11 4
Change in valuation allowance.............................. (16) (73) (28)
---- ---- ----
$ -- $ -- $ --
==== ==== ====

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands except share data)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets
(liabilities) were comprised of the following at December 31, 1997 and 1998:

[Download Table]

1998
1997 -----

Gross deferred tax assets:
Inventories.................................................. $ 99 $ 99
Property & equipment......................................... 8 10
NOL carryforward............................................. 85 104
----- -----
192 213
Gross deferred tax liabilities:
Account receivable........................................... (9) (2)
Valuation allowance............................................ (183) (211)
----- -----
$ -- $ --
===== =====

11. Common stock

Common stock of the Companies includes the following: 2,000 shares of $100
par Common Stock for California Equipment Company of which 1,016 shares were
issued and outstanding and 1,000 shares of $100 par Common Stock for California
Equipment Company of Sacramento of which 600 shares were issued and outstanding
on December 31, 1997 and 1998.

12. Commitments and contingencies

The Companies guarantee the outstanding debt under revolving credit facility
and note payable of its affiliate, Milligan-Spika Company. Debt outstanding at
December 31, 1997 and 1998, totalled $936 and $1,026, respectively. Such debt
has been subsequently paid off.

13. Subsequent event

On August 26, 1999, HDA Parts System, Inc. purchased the Companies. This was
accounted for as a purchase. The financial statements have not been effected by
this transaction.

F-128

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

Unaudited Combined Balance Sheet
At June 30, 1999
(amounts in thousands)

[Download Table]

ASSETS
------
Current assets:
Cash and cash equivalents............................................. $ 103
Restricted cash....................................................... 176
Accounts receivable, net of allowance for doubtful accounts of $69.... 1,097
Current portion of patronage dividend receivable...................... 65
Inventories........................................................... 2,305
Prepaid expenses and other current assets............................. 36
------
Total current assets................................................ 3,782
Property and equipment, net........................................... 129
Other assets.......................................................... 110
------
Total assets........................................................ $4,021
======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Cash overdraft........................................................ $ 231
Accounts payable...................................................... 1,336
------
Total current liabilities........................................... 1,567
Long Term Liabilities................................................... 1,587
Stockholders' equity:
Common stock.......................................................... 162
Additional paid-in capital............................................ 848
Retained earnings..................................................... (143)
------
Total stockholders' equity.......................................... 867
------
Total liabilities and stockholders' equity.......................... $4,021
======

The accompanying notes are an integral part of these financial statements.

F-129

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CALIFORNIA EQUIPMENT COMPANY AND CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

UNAUDITED COMBINED STATEMENT OF INCOME
For the Six Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

Sales................................................................... $3,435
Cost of sales........................................................... 2,290
------
Gross profit............................................................ 1,145
Operating expenses:
Selling, general, and administrative expenses......................... 1,175
Depreciation and amortization......................................... 32
------
1,207
Loss from operations.................................................. (62)
Other income (expense):
Interest expense...................................................... (53)
Other income, net..................................................... 124
------
71
Income before income taxes............................................ 9
Provision for income taxes.............................................. 2
------
Net income and comprehensive income................................... $ 7
======

The accompanying notes are an integral part of these financial statements.

F-130

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CALIFORNIA EQUIPMENT COMPANY AND CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

UNAUDITED COMBINED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

June 30,
1999
--------

Operating activities:
Net income and comprehensive income.................................. $ 7
Adjustments to net income:
Depreciation and amortization...................................... 32
Changes in operating assets and liabilities:
Restricted cash.................................................... (54)
Accounts receivable................................................ (214)
Patronage dividends receivable..................................... 122
Inventories........................................................ (544)
Prepaid expenses and other current assets.......................... (3)
Other assets....................................................... (75)
Accounts payable................................................... 470
Other payables..................................................... (45)
Accrued expenses and other current liabilities..................... 375
-----
Net cash provided by operating activities........................ 71
Investing activities:
Purchase of property and equipment................................... (31)
-----
Net cash used in investing activities............................ (31)
Financing activities:
Increase in cash overdraft........................................... 69
Principal payments on notes payable.................................. (53)
Due to affiliate..................................................... (8)
-----
Net cash provided by financing activities........................ 8
Net increase in cash and equivalents................................... 48
Cash and equivalents, beginning of year................................ 55
-----
Cash and equivalents, end of year...................................... $ 103
=====
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................................... $ 52
Income taxes....................................................... $ 1

The accompanying notes are an integral part of these financial statements.

F-131

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

UNAUDITED COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

For the Period Ended June 30, 1999
(amounts in thousands)

[Download Table]

Additional Total
Common Paid-in Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- -------- -------------

Balance at December 31, 1998.......... $162 $848 $(150) $860
Net income and comprehensive income... -- -- 7 7
---- ---- ----- ----
Balance at June 30, 1999.............. $162 $848 $(143) $867
==== ==== ===== ====

The accompanying notes are an integral part of these financial statements.

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CALIFORNIA EQUIPMENT COMPANY AND CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
(amounts in thousands)

1. Description of the business and basis of presentation

California Equipment Company and California Equipment Company of Sacramento
(the "Companies") are distributors of truck parts and selected speciality
products throughout Northern California.

During the period from January 1, 1999 through June 30, 1999, the Companies
have been under the common ownership and control of management. The combination
of California Equipment Company and the California Equipment Company of
Sacramento has been accounted for in a manner similar to a pooling of
interests.

2. Summary of Significant Accounting Policies

Revenue recognition

Use of estimates

Cash and cash equivalents

Inventories

Inventories consist of truck parts and cores, which are valued at the lower
of cost or market. Cost is determined on the average cost method.

F-133

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CALIFORNIA EQUIPMENT COMPANY AND
CALIFORNIA EQUIPMENT COMPANY OF SACRAMENTO

NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Property and equipment

The useful lives for property and equipment are as follows:

[Download Table]

Useful
life
---------

3. Restricted cash

4. Inventories

Inventories consist of the following at June 30, 1999

[Download Table]

Parts inventory....................................................... $1,723
Cores................................................................. 582
------
$2,305
======

5. Property & equipment

Property and equipment consist of the following at June 30, 1999

[Download Table]

Leasehold improvement............................................... $ 52
Machinery, equipment, furniture & fixtures.......................... 515
Computer and data processing equipment.............................. 363
Vehicles............................................................ 226
Equipment under capital leases...................................... 43
-------
1,199
Less: accumulated depreciation...................................... (1,070)
-------
$ 129
=======

6. Subsequent event

On August 26, 1999, HDA Parts System, Inc. purchased the Companies. This
was accounted for as a purchase. The unaudited financial statements have
not been affected by this transaction.

F-134

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REPORT OF INDEPENDENT ACCOUNTANTS

To Board of Directors and Shareholders of
Superior Truck & Auto Supply, Inc.:

In our opinion, the accompanying balance sheets and related statements of
income and retained earnings and cash flows present fairly, in all material
respects, the financial position of Superior Truck & Auto Supply, Inc. ("the
Company") at December 31, 1997 and 1998 and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

September 16, 1999
Chicago, Illinois

F-135

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SUPERIOR TRUCK & AUTO SUPPLY, INC.

BALANCE SHEETS
At December 31, 1997 and 1998
(amounts in thousands, except for share data)

[Download Table]

1997 1998
------ ------
ASSETS
------

Current assets:
Cash and cash equivalents...................................... $ 84 $ 69
Investments.................................................... 71 65
Accounts receivable, less allowance for doubtful accounts of
$20 and $23, respectively..................................... 339 371
Inventory...................................................... 995 1,110
Current portion of rebate receivable........................... 16 42
Prepaid expenses and other current assets...................... 45 13
------ ------
Total current assets......................................... 1,550 1,670
Property and equipment, net.................................... 334 347
Long-term portion of rebate receivable and other assets........ 46 87
------ ------
Total assets................................................. $1,930 $2,104
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable................................................. 399 302
Accrued liabilities.............................................. 62 69
Note payable, related party...................................... 1,118 1,084
------ ------
Total liabilities............................................ 1,579 1,455
====== ======
Stockholders' equity:
Common stock ($5 par value; 10,001 shares authorized and
outstanding).................................................... 50 50
Retained earnings................................................ 301 599
------ ------
Total stockholders' equity................................... 351 649
------ ------
Total liabilities and stockholders' equity................... $1,930 $2,104
====== ======

The accompanying notes are an integral part of these financial statements.

F-136

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SUPERIOR TRUCK & AUTO SUPPLY, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------ ------

Net sales............................................... $3,004 $3,343 $3,640
Cost of sales........................................... 1,918 1,969 2,065
------ ------ ------
Gross profit............................................ 1,086 1,374 1,575
Selling, general and administrative expenses............ 1,039 1,208 1,285
------ ------ ------
Operating income........................................ 47 166 290
Other Income............................................ (7) (11) (9)
------ ------ ------
Net income and comprehensive income..................... 54 177 299
Retained earnings, beginning of year.................... 70 124 301
------ ------ ------
Stockholder distribution................................ -- -- (1)
------ ------ ------
Retained earnings, end of year.......................... $ 124 $ 301 $ 599
====== ====== ======

The accompanying notes are an integral part of these financial statements.

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SUPERIOR TRUCK & AUTO SUPPLY, INC.

STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
---- ---- -----

Operating activities
Net income and comprehensive income........................ $ 54 $177 $ 299
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation............................................. 76 63 57
Changes in operating assets and liabilities:
Accounts receivable, net................................. (49) (38) (32)
Rebate receivable........................................ (16) (20) (41)
Inventory, net........................................... (30) (98) (115)
Prepaid expenses and other current assets................ (64) (20) 6
Other assets............................................. -- (10) --
Accounts payable......................................... 76 73 (97)
Accrued liabilities...................................... (23) 6 7
---- ---- -----
Net cash provided by operating activities.................. 24 133 84
---- ---- -----
Investing activities
Investments................................................ -- (71) 6
Acquisitions of property and equipment..................... (49) (23) (70)
---- ---- -----
Net cash used in investing activities...................... (49) (94) (64)
---- ---- -----
Financing activities
Stockholder distribution................................... -- -- (1)
Increase (decrease) in loan payable........................ 16 (16) 3
Increase (decrease) in note payable........................ 60 (16) (37)
---- ---- -----
Net cash provided (used) in financing activities........... 76 (32) (35)
---- ---- -----
Net increase (decrease) in cash............................ 51 7 (15)
Cash at beginning of year.................................. 26 77 84
---- ---- -----
Cash at end of year........................................ $ 77 $ 84 $ 69
==== ==== =====
Supplemental disclosure of cash flow information:
Cash paid during year for interest....................... $ -- $ -- $ --
==== ==== =====

The accompanying notes are an integral part of these financial statements.

F-138

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SUPERIOR TRUCKS & AUTO SUPPLY, INC.

NOTES TO THE FINANCIAL STATEMENTS
(amounts in thousands)

1. Basis of Presentation

The Company is engaged in the wholesale, retail, and refurbishing of truck
parts in the Northeast. The Company is headquartered in Norwell, Massachusetts.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.

Inventory

Inventories consist of truck parts and cores, which are valued at the lower
of cost or market. Cost is determined using the average cost method.

Property, Plant and Equipment

Property, plant and equipment is carried at cost less accumulated
amortization and depreciation. Depreciation is calculated using primarily
accelerated methods and is charged to operations over the estimated useful
lives of the assets which range from five to thirty-nine years as follows:

[Download Table]

Methods Useful Life
------- -----------

Furniture and fixtures MACRS 150% Declining 5 years
Equipment MACRS 150% Declining 5 years
Computer Equipment MACRS 150% Declining 5 years
Automobiles and trucks MACRS 150% Declining 5 years
Leasehold improvements Straight-line 31 1/2-39 years

Revenue Recognition

Income Taxes

The Company has elected "S" corporation status for federal and state income
tax reporting purposes. Accordingly, all federal and state income tax
liabilities pass through to the stockholders.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

F-139

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SUPERIOR TRUCKS & AUTO SUPPLY, INC.

NOTES TO THE FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

3. Inventory

The inventory balances at December 31, 1996, 1997 and 1998 consist of the
following:

[Download Table]

1997 1998
---- ------

Parts........................................................... $953 $1,065
Cores........................................................... 42 45
---- ------
Total inventory................................................. $995 $1,110
==== ======

4. Property, Plant and Equipment

Property, plant and equipment are recorded at cost. At December 31, 1997 and
1998 property and equipment consisted of the following:

1997 1998
---- ------

Furniture and fixtures.......................................... $148 $ 150
Machinery and equipment......................................... 187 202
Automobiles and trucks.......................................... 153 188
Leasehold improvements.......................................... 280 284
---- ------
768 824
Less: accumulated depreciation.................................. 434 477
---- ------
$334 $ 347
==== ======

5. Related Party Transactions

The Company has a month to month rental arrangement with a shareholder.
Aggregate payments of approximately $72, $71 and $71 were under this
arrangement during 1996, 1997 and 1998, respectively.

The Company has a note payable with a shareholder of the Company. The note is
non-interest bearing and due on demand.

The Company owns a minority interest in the stock of HD America, Inc., a
cooperative. The Company purchased approximately 37%, 56% and 64% of its goods
through this cooperative and recorded a rebate receivable of $32, $71 and $84,
for the years ended December 31, 1996, 1997 and 1998, respectively. These
rebates earned are allocated between cost of sales and inventory.

6. Profit Sharing Plan

Substantially all employees of the Company are covered by the Company's
employee profit sharing plan. The amount of the contributions is at the
discretion of the Company. There were no employer contributions for the years
ended December 31, 1996, 1997, and 1998.

7. Subsequent Event

On June 7, 1999 the Company was acquired by HDA Parts System, Inc. The
financial statements have not been effected by this transaction.

F-140

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SUPERIOR TRUCK & AUTO SUPPLY, INC.

UNAUDITED STATEMENT OF INCOME
For the Period from January 1, 1999 to June 7, 1999
(amounts in thousands)

[Download Table]

Net sales............................................................... $1,614
Cost of sales........................................................... 969
------
Gross profit............................................................ 645
Selling, general and administrative expenses............................ 569
------
Operating income........................................................ 76
Other Income............................................................ --
------
Net income and comprehensive income..................................... $ 76
======

The accompanying notes are an integral part of these financial statements.

F-141

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SUPERIOR TRUCK & AUTO SUPPLY, INC.

UNAUDITED STATEMENT OF CASH FLOWS
For the Period from January 1, 1999 to June 7, 1999
(amounts in thousands)

[Download Table]

Operating activities
Net income and comprehensive income..................................... $ 76
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation.......................................................... 35
Changes in operating assets and liabilities:
Accounts receivable, net.............................................. (58)
Rebate receivable..................................................... 17
Inventory, net........................................................ 44
Prepaid expenses and other current assets............................. 7
Accounts payable...................................................... (4)
Accrued liabilities................................................... 6
----
Net cash provided by operating activities............................... 123
----
Financing activities
Decrease in loan payable................................................ (94)
----
Net cash used in financing activities................................... (94)
----
Net increase in cash.................................................... 29
Cash at beginning of year............................................... 134
----
Cash at end of year..................................................... $163
====

The accompanying notes are an integral part of these financial statements.

F-142

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SUPERIOR TRUCKS & AUTO SUPPLY, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
(amounts in thousands)

1. Basis of Presentation

The Company is engaged in the wholesale, retail, and refurbishing of truck
parts in the Northeast. The Company is headquartered in Norwell, Massachusetts.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.

Inventory

Inventories consist of truck parts and cores, which are valued at the lower
of cost or market. Cost is determined using the average cost method.

Property, Plant and Equipment

[Download Table]

Methods Useful Life
------- -----------

Revenue Recognition

F-143

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SUPERIOR TRUCKS & AUTO SUPPLY, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Income Taxes

The Company has elected "S" corporation status for federal and state income
tax reporting purposes. Accordingly, all federal and state income tax
liabilities pass through to the stockholders.

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

2. Subsequent Event

On June 7, 1999 the Company was acquired by HDA Parts System, Inc. This was
accounted for as a purchase. The unaudited financial statements have not been
effected by this transaction.

F-144

424B3 274th Page of 423 TOC 1st Previous Next ↓Bottom Just 274th
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Wheels and Brakes, Inc. and Subsidiaries

In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income and stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Wheels and
Brakes, Inc. and subsidiaries (the "Company") at January 31, 1998 and 1999, and
the results of their operations and their cash flows for each of the three
years in the period ended January 31, 1999 in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

September 15, 1999
Chicago, Illinois

F-145

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
At January 31, 1998 and 1999
(amounts in thousands except share data)

[Download Table]

1998 1999
------ -------
ASSETS
------

Current Assets:
Cash........................................................ $ 96 $ 99
Receivables, net of allowance for doubtful accounts of $146
and $151................................................... 2,390 2,339
Rebate receivable........................................... 456 510
Inventories................................................. 5,218 5,592
Deferred income taxes....................................... 175 196
Prepaid expenses............................................ 54 66
------ -------
Total current assets...................................... 8,389 8,802
Property and equipment, net of accumulated depreciation....... 563 535
Other Assets
Cash value of life insurance, net of loans of $49 and $49... 118 121
Other Assets................................................ 50 44
Non-current portion of rebate receivables................... 731 804
------ -------
Total Assets.............................................. $9,851 $10,306
====== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities:
Cash overdraft.............................................. $ 915 $ 1,102
Line of credit.............................................. 2,722 2,645
Current portion of note payable............................. 44 93
Current portion of capital lease obligation................. 15 17
Current portion of liability for ESOP indebtedness.......... 52 56
Accounts payable............................................ 2,253 2,261
Employee savings............................................ 299 303
Accrued expenses............................................ 546 505
Income taxes payable........................................ (5) 42
------ -------
Total current liabilities................................. 6,841 7,024
------ -------
Long-term debt:
Notes payable, net of current portion......................... 214 293
Capital lease obligations, net of current portion............. 70 54
Deferred income taxes......................................... 25 32
Liability for ESOP indebtedness............................... 119 63
------ -------
Total liabilities......................................... 7,269 7,466
------ -------
Stockholders' Equity
Common stock ($.04 par value; 100,000 shares authorized;
85,925 and 82,175 shares issued; 70,174 and 68,934 shares
outstanding)............................................... 3 3
Paid in capital............................................. 84 73
Retained earnings........................................... 2,930 3,114
Less: Guarantee for ESOP contribution....................... (170) (118)
Cost of treasury stock (15,731 and 13,241 shares)........... (265) (232)
------ -------
Total stockholders' equity................................ 2,582 2,840
------ -------
Total liabilities and stockholders' equity................ $9,851 $10,306
====== =======

The accompanying notes are an integral part of these financial statements.

F-146

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
For the years ended January 31, 1997, 1998 and 1999
(amounts in thousands)

[Download Table]

1997 1998 1999
------- ------- -------

Net sales............................................ $22,980 $23,119 $23,702
Cost of sales........................................ 16,135 16,405 16,846
------- ------- -------
Gross profit......................................... 6,845 6,714 6,856
Selling, general and administrative expense.......... 6,490 6,380 6,302
------- ------- -------
Income from operations........................... 355 334 554
------- ------- -------
Other income (expenses):
Net gain (loss) on disposals of fixed assets....... 2 -- (9)
Interest expense................................... (362) (388) (386)
Bad debt recoveries................................ 1 4 7
Finance charges.................................... 34 37 39
Rental income, net................................. 119 109 144
Interest income.................................... 24 36 40
Other.............................................. 9 26 17
------- ------- -------
Net other expenses............................... (173) (176) (148)
------- ------- -------
Income before income taxes........................... 182 158 406
Provision for income taxes........................... 77 66 166
------- ------- -------
Net income and comprehensive income.................. $ 105 $ 92 $ 240
======= ======= =======

The accompanying notes are an integral part of these financial statements.

F-147

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended January 31, 1997, 1998 and 1999
(amounts in thousands)

[Download Table]

Guarantee
Common Paid in Retained for ESOP Treasury
stock capital earnings contribution stock Totals
------ ------- -------- ------------ -------- ------

Balance--January 31,
1996................... $ 4 $ 84 $2,775 $(257) $(270) $2,336
Net income and
comprehensive income... -- -- 105 -- -- 105
Reduction in ESOP
guarantee.............. -- -- -- 41 -- 41
Purchases of treasury
stock.................. -- -- -- -- (4) (4)
--- ---- ------ ----- ----- ------
Balance--January 31,
1997................... 4 84 2,880 (216) (274) 2,478
Net income and
comprehensive income... -- -- 92 -- -- 92
Reduction in ESOP
guarantee.............. -- -- -- 46 -- 46
Purchases of treasury
stock.................. -- -- -- -- (34) (34)
Retirement of treasury
stock.................. (1) -- (42) -- 43 --
--- ---- ------ ----- ----- ------
Balance--January 31,
1998................... 3 84 2,930 (170) (265) 2,582
Net income and
comprehensive income... -- -- 240 -- -- 240
Reduction in ESOP
guarantee.............. -- -- -- 52 -- 52
Purchases of treasury
stock.................. -- -- -- -- (34) (34)
Retirement of treasury
stock.................. -- (11) (56) -- 67 --
--- ---- ------ ----- ----- ------
Balance--January 31,
1999................... 3 73 3,114 (118) (232) 2,840
=== ==== ====== ===== ===== ======

The accompanying notes are an integral part of these financial statements.

F-148

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 31, 1997, 1998 and 1999
(amounts in thousands)

[Download Table]

1997 1998 1999
-------- -------- --------

Cash Flows from Operating Activities
Net income and comprehensive income............ $ 105 $ 92 $ 240
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 48 59 64
Loss (gain) on disposals of fixed assets...... (2) -- 9
Change in operating assets and liabilities:
Receivables................................. (188) 204 167
Rebate receivables.......................... (36) (167) (127)
Inventories................................. (12) (350) (241)
Prepaid expenses............................ 24 (49) (12)
Other assets................................ (8) (6) 3
Deferred taxes.............................. (30) 10 (14)
Accounts payable............................ 556 171 (68)
Employee savings............................ 23 21 4
Accrued expenses............................ (54) 44 (41)
Income taxes payable........................ 23 (28) 47
-------- -------- --------
Net cash provided by operating
activities:.............................. 449 1 31
-------- -------- --------
Cash Flows From Investing Activities
Purchases of property, plant and equipment..... (141) 15 (21)
Proceeds from sales of property and equipment.. 5 20 --
-------- -------- --------
Net cash provided (used) by investing
activities............................... (136) 35 (21)
-------- -------- --------
Cash Flows From Financing Activities
Proceeds from line of credit................... 23,775 25,806 26,118
Payments on line of credit..................... (24,640) (25,421) (26,195)
Cash overdraft................................. 619 (351) 187
Payments on notes payable and capital lease.... (38) (55) (83)
Purchases of treasury stock.................... (4) (34) (34)
Proceeds from notes payable.................... -- 47 --
-------- -------- --------
Net cash provided (used) by financing
activities............................... (288) (8) (7)
Net increase in cash............................. 25 28 3
Cash--Beginning.................................. 43 68 96
-------- -------- --------
Cash--Ending..................................... $ 68 $ 96 $ 99
======== ======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest...................................... $ 363 $ 385 $ 387
======== ======== ========
Taxes......................................... $ 68 $ 116 $ 146
======== ======== ========
Schedule of Non-Cash Investing and Financing
Activities:
Decrease in liability for ESOP indebtedness and
guarantee for ESOP contribution............... $ 41 $ 46 $ 52
======== ======== ========
New borrowings of debt to finance purchases of
property and equipment........................ $ -- $ 89 $ 196
======== ======== ========

The accompanying notes are an integral part of these financial statements.

F-149

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands)

1. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying financial statements include the accounts of Wheels and
Brakes, Inc. (the "Company") and its wholly owned subsidiaries, Power Train of
Georgia, Inc., Southeastern Commercial Warehouse, Inc. and Spec-rite Brake
Company. All significant intercompany balances and transactions between the
Company and its wholly owned subsidiaries have been eliminated.

On September 2, 1997, Power Train of Georgia, Inc. and Southeastern
Commercial Warehouse, Inc. were dissolved. Their operations were merged into
the operations of the Company.

Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include any
highly liquid investment instruments purchased with a maturity of three months
or less. Cash and cash equivalents do not include disbursements which have not
yet cleared the line of credit, and which are listed as cash overdrafts in the
accompanying consolidated balance sheets.

Inventories

Inventories consist of truck parts and cores, which are valued at the lower
of the cost or market using the last in, first out (LIFO) method. Inventories
valued at LIFO amounted to $5,327 and $5,638 at January 31, 1998 and 1999,
respectively, which were below estimated average cost by $386 and $391,
respectively.

Deferred Income Taxes

The Company applies an asset and liability approach to accounting for income
taxes. Deferred tax liabilities and assets are recognized for the expected
future tax consequences of temporary differences between the financial
statement and tax basis of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to reverse.

Property and Equipment

Property and equipment are recorded at cost. Depreciation of fixed assets is
provided using straight-line methods over estimated useful lives for financial
reporting purposes and accelerated methods over statutory lives for income tax
reporting purposes. Amortization of leasehold improvements is provided over
estimated useful lives for financial reporting purposes. Maintenance and
repairs are expensed as incurred, and major renewals and betterments are
capitalized. The net gain or loss on retires property is charged to operations,
and the related cost and accumulated depreciation are removed from the
accounts.

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core credits". Cores, which are reusable
components of originally purchased parts,

F-150

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

may be exchanged for credit at the time of sale or within a specified period.
Returned cores are either returned to the vendor for credit or remanufactured.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. Inventories

The inventory balances at January 31 consist of the following:

[Download Table]

1998 1999
------ ------

Parts.......................................................... $4,112 $4,371
Cores.......................................................... 1,106 1,221
------ ------
Total inventory................................................ $5,218 $5,592
====== ======

3. Property and equipment

Property and equipment consists of the following at January 31:

[Download Table]

1998 1999
------ ------

Computer systems.............................................. $ 204 $ 108
Office furniture and fixtures................................. 285 291
Machinery and equipment....................................... 584 602
Vehicles...................................................... 45 44
Buildings and improvements.................................... 404 396
Land.......................................................... 96 96
------ ------
1,618 1,537
Less: accumulated depreciation................................ 1,055 1,002
------ ------
$ 563 $ 535
====== ======

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

4. Notes Payable

The Company's indebtedness under notes as of January 31 consists of the
following:

[Download Table]

1998 1999
----- ----

Note, payable in quarterly installments of $15 principal and
interest (at 7%) through April 2002; guaranteed by the
majority stockholder.......................................... $ -- $172
Note to American National Bank & Trust Company, payable in
monthly installments appropriate to amortize the note through
September 2005. The interest rate is equivalent to the three
year U.S. Treasury note plus 3% and is adjusted every 3 years;
collateralized by land and buildings.......................... 173 157
Note to former shareholder, payable in monthly installments of
$1 principal and interest (at 10%) through January 2001;
collateralized by 8,425 shares treasury stock................. 43 30
Note to First Union, payable in monthly installments of $1
principal and interest (at 9.51%) through February 2001;
collateralized by equipment................................... 38 27
Note to former shareholder, payable in monthly installments of
$1 principal and interest (at 10.0%) through May 1998;
collateralized by 3,750 shares of treasury stock.............. 4 --
----- ----
Total.......................................................... 258 386
Less current portion........................................... 44 93
----- ----
$ 214 $293
===== ====

As of January 31, 1999, future maturities are as follows:

[Download Table]

2000............................................................... $ 93
2001............................................................... 101
2002............................................................... 79
2003............................................................... 37
2004............................................................... 25
Thereafter.......................................................... 51
----
$386
====

5. Line of Credit

The Company has a $4,500 line of credit agreement with NationsBank.
Borrowings bear an interest at prime plus 0.75% and interest is paid monthly.
The borrowings are collateralized by trade accounts receivable and inventories
of the Company; the Company can borrow up to 85% of accounts receivable, as
defined, and up to 45% of inventories, as defined. In addition, the borrowings
are guaranteed by the President, who is the largest single stockholder of the
Company. The borrowings outstanding on the line of credit were $2,722 and
$2,645 at January 31, 1998 and 1999, respectively.

F-152

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WHEELS AND BRAKES, INC. AND SUBSIDIAIRES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

6. Lease Agreements

Operating Leases

The Company leases office space, warehouse facilities, vehicles and certain
equipment under non-cancelable leases expiring at various dates. Certain
offices and facilities leases are with companies owned by stockholders or
employees of the Company. In addition to the fixed rentals, certain leases
require payment of taxes, utilities, and various other use and occupancy costs,
and include renewal provisions. The approximate future minimum rental
obligations under these leases are as follows:

[Download Table]

2000............................................................. $ 610
2001............................................................. 503
2002............................................................. 451
2003............................................................. 342
2004............................................................. 314
Thereafter........................................................ 400
------
$2,620
======

Rent expense for offices and warehouse facilities during the years ended
January 31, 1997, 1998 and 1999 amounted to $424, $425 and $437, respectively.
In addition, $35, $36 and $31, respectively, of additional rent were offset
against rental income. Rental payments for leases with related parties amounted
to $317, $318 and $313, respectively, during the years ended January 31, 1997,
1998 and 1999.

Capital Lease

The Company leases certain equipment under a capital lease which will expire
October 2002. The economic substance of these leases has the company financing
its acquisition of assets through the leases over their terms and, accordingly,
they are reflected in the Company's assets and liabilities. The value of the
leases assets as of January 31, 1998 and 1999 is as follows:

Future minimum payments under the capital lease are as follows:

[Download Table]

2000................................................................ $22
2001................................................................ 22
2002................................................................ 22
2003................................................................ 17
---
83
Less: Amount representing interest.................................. 12
---
71
Less: Current portion............................................... 17
---
$54
===

Total lease payments under this capital lease were $4 and $22 during the
years ended January 31, 1998 and 1999, respectively.

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands except share data)

7. Income Taxes

The provision for income taxes for the years ended January 31 was as follows:

[Download Table]

1997 1998 1999
---- ---- ----

Current income taxes:
Federal.................................................. $ 92 $35 $152
State.................................................... 14 8 28
Deferred income taxes...................................... (29) 23 (14)
---- --- ----
$ 77 $66 $166
==== === ====

The provision for income taxes differed from the United States statutory rate
for the years ended January 31 for the following reasons:

[Download Table]

1997 1998 1999
---- ---- ----

Federal income tax at statutory rate....................... $62 $54 $138
Surtax exemption........................................... (6) (8) --
State tax provision, net................................... 8 7 16
Non-deductible entertainment expense....................... 8 7 5
Officers' life insurance................................... 4 5 6
Other...................................................... 1 1 1
--- --- ----
$77 $66 $166
=== === ====

Deferred tax assets (liabilities) were comprised of the following at January
31:

[Download Table]

1998 1999
---- ----

Gross deferred tax assets:
Inventory...................................................... $ 76 $ 90
Accounts receivable............................................ 55 57
Vacation and bonus accruals.................................... 44 49
---- ----
175 196
Gross deferred tax liabilities:
Property and equipment......................................... (25) (32)
---- ----
Net deferred tax asset........................................... $150 $164
==== ====

8. Employee Stock Ownership Plan (ESOP)

In 1985 the Company adopted an ESOP. Upon adoption, the ESOP Plan purchased
27,600 shares of common stock, constituting 30.78% of the outstanding common
stock, from the major stockholder at that time. The purchase price was $554 and
was evidenced by a payment of $54 and $500 financed by the seller for fifteen
years at 10.5%, with monthly payments of $6 beginning February 1986. The
Company has guaranteed the note of the ESOP. This guarantee is shown as a
reduction of stockholders' equity in the accompanying consolidated balance
sheets in the amount of $170 and $119 as of January 31, 1998 and 1999,
respectively.

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands except share data)

During the years ended January 31, 1997, 1998 and 1999, the Company purchased
153, 1,334 and 1,240 shares, respectively, of stock from ESOP. This stock
represented the vested shares owned by certain individuals who no longer worked
for the Company or participated in the ESOP. Rather than have the ESOP
repurchase the shares and reallocate them to other participants, the Company
elected to acquire them. These shares are included in treasury stock in the
accompanying consolidated balance sheets.

9. Related Party Transactions

The Company is a minority stockholder in HD America, Inc., a cooperative. As
an incentive to purchase from HD America, Inc., the Company receives rebates
based on amounts purchased. These rebates are paid over a three year period.
During the years ended January 31, 1997, 1998 and 1999, the Company purchased
$8,078, $8,711 and $10,646, respectively, resulting in rebates of $675, $811
and $814, respectively. At January 31, 1998 and 1999, $1,187 and $1,314 of HD
America, Inc. rebate receivables are included in the balance sheet,
respectively.

The Company leases certain office and warehouse facilities from related
parties.

The Company periodically loans money to its employees and officers. No
interest is generally charged on these advances and there is generally no fixed
repayment date. At January 31, 1998 and 1999 these advances were $10 and $5,
respectively.

10. Subsequent Events

Subsequent to January 31, 1999, the Company's stockholders have agreed to
sell their ownership interest in the Company to HDA Parts System, Inc. The
financial statements have not been affected by this transaction.

F-155

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEET
At June 30, 1999
(amounts in thousands, except share data)

[Download Table]

ASSETS
------

Current Assets:
Cash................................................................ $ 108
Receivables, net of allowance for doubtful accounts of $228 ........ 4,090
Inventories......................................................... 5,586
Prepaid expenses.................................................... 105
Current portion of notes receivable/patronage dividend.............. 33
-------
Total current assets.............................................. 9,922
Property and equipment, net of accumulated depreciation............... 251
Other Assets........................................................ 52
-------
Total Assets...................................................... $10,225
=======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current Liabilities:
Note payable........................................................ 2,463
Current portion of long term debt................................... 802
Accounts payable.................................................... 3,460
Accrued liabilities................................................. 602
-------
Total current liabilities......................................... 7,327
-------
Stockholders' Equity
Common stock ($.04 par value; 100,000 shares authorized; 82,175
shares issued; 68,934 shares outstanding).......................... 3
Paid in capital..................................................... 73
Retained earnings................................................... 3,172
Less: Guarantee for ESOP contribution............................... (118)
Cost of treasury stock (13,241 shares).............................. (232)
-------
Total stockholders' equity........................................ 2,898
-------
Total liabilities and stockholders' equity........................ $10,225
=======

The accompanying notes are an integral part of these financial statements.

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF INCOME
For the Five Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

Net sales.............................................................. $10,943
Cost of sales.......................................................... 7,785
-------
Gross profit........................................................... 3,158
Selling, general and administrative expense............................ 3,052
-------
Income from operations............................................. 106
-------
Other income (expenses):
Interest expense..................................................... (108)
Interest income...................................................... --
Other income......................................................... 98
-------
Income before income taxes............................................. 96
Provision for income taxes............................................. 38
-------
Net income and comprehensive income.................................... $ 58
=======

The accompanying notes are an integral part of these financial statements.

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Five Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

Guarantee
Common Paid in Retained for ESOP Treasury
stock capital earnings contribution stock Totals
------ ------- -------- ------------ -------- -------

Balance--January 31,
1999................... $ 3 $ 73 $ 3,114 $ (118) $ (232) $ 2,840
Net income and
comprehensive income... -- -- 58 -- -- 58
--- ---- ------- ------ ------ -------
Balance at June 30,
1999................... $ 3 $ 73 $ 3,172 $ (118) $ (232) $2,898
=== ==== ======= ====== ====== =======

The accompanying notes are an integral part of these financial statements.

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WHEELS AND BRAKES, INC., AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Five Months Ended June 30, 1999
(amounts in thousands)

[Download Table]

Cash Flows from Operating Activities
Net income and comprehensive income................................... $ 58
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 27
Change in operating assets and liabilities:
Receivables........................................................ 826
Inventories........................................................ (6)
Prepaid expenses................................................... (157)
Current Portion Notes Receivable/patronage dividend................ (477)
Other assets....................................................... 8
Accounts payable................................................... (97)
Accrued expenses................................................... (97)
-----
Net cash provided by operating activities:....................... 85
-----
Cash Flows From Investing Activities
Purchases of property, plant and equipment............................ (19)
Proceeds from sales of property and equipment......................... 276
-----
Net cash provided by investing activities........................ 257
-----
Cash Flows From Financing Activities
Payments on notes payable and capital lease........................... (333)
-----
Net cash used by financing activities............................ (333)
Net increase in cash.................................................... 9
Cash--Beginning......................................................... 99
-----
Cash--Ending............................................................ $ 108
=====

The accompanying notes are an integral part of these financial statements.

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands)

1. Summary of Significant Accounting Policies and basis of presentation

Principles of Consolidation

Cash Equivalents

Inventories

Inventories consist of truck parts and cores, which are valued at the lower
of the cost or market using the last in, first out (LIFO) method.

Property and Equipment

Revenue Recognition

Revenue is recognized when products are shipped. Sales for core parts are
recorded net of exchanges and "core credits". Cores, which are reusable
components of originally purchased parts,
may be exchanged for credit at the time of sale or within a specified period.
Returned cores are either returned to the vendor for credit or remanufactured.

F-160

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WHEELS AND BRAKES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(amounts in thousands)

Use of Estimates

2. Inventories

The inventory balances at June 30, 1999 consist of the following:

[Download Table]

Parts................................................................. $4,321
Cores................................................................. 1,265
------
Total inventory....................................................... $5,586
======

3. Property and equipment

Property and equipment consists of the following at June 30, 1999:

[Download Table]

Computer systems..................................................... $ 117
Office furniture and fixtures........................................ 291
Machinery and equipment.............................................. 609
Vehicles............................................................. 44
Buildings and improvements........................................... 172
------
1,233
Less: accumulated depreciation....................................... 982
------
$ 251
======

4. Subsequent Events

On October 8, 1999, the Company's stockholders sold their ownership interest
in the Company to HDA Parts System, Inc. This was accounted for as a purchase.
The unaudited financial statements have not been affected by this transaction.

F-161

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
QDSP Holdings, Inc.

We have audited the accompanying consolidated balance sheet of QDSP Holdings,
Inc. and subsidiaries (the Company) as of December 31, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the period from July 28, 1998 (date of inception) to December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of QDSP Holdings, Inc. and subsidiaries at December 31, 1998, and the
consolidated results of their operations and their consolidated cash flows for
the period from July 28, 1998 (date of inception) to December 31, 1998, in
conformity with generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The consolidating balance
sheet and consolidating statement of operations appearing in conjunction with
the consolidated financial statements are presented for purposes of additional
analysis and are not a required part of the consolidated financial statements.
Such information has been subjected to the auditing procedures applied in our
audit of the consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the consolidated financial
statements taken as a whole.

/s/ Ernst & Young LLP

Chicago, Illinois
April 23, 1999

F-162

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QDSP HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET
December 31, 1998
(Dollars in Thousands, Except per Share Data)

[Download Table]

ASSETS
------
Current assets:
Cash and cash equivalents.......................................... $ 1,432
Accounts receivable, net of allowance for doubtful accounts of
$430.............................................................. 17,425
Inventories........................................................ 31,305
Deferred income taxes.............................................. 2,001
Other current assets............................................... 2,179
--------
Total current assets............................................. 54,342
Property, plant, and equipment, net................................ 6,667
Goodwill, net...................................................... 61,584
Deferred financing costs, net...................................... 1,715
Deferred income taxes.............................................. 45
Other assets....................................................... 878
--------
Total assets..................................................... $125,231
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable................................................... $ 10,429
Accrued expenses................................................... 12,176
Current portion of long-term debt.................................. 1,270
Current portion of capital lease obligations....................... 333
--------
Total current liabilities........................................ 24,208
Long-term debt, less current portion............................... 46,982
Capital lease obligations, less current portion.................... 176
Other long-term liabilities........................................ 154
Stockholders' equity:
Preferred stock, $100 stated value; authorized shares 500,000;
issued and outstanding shares 269,250............................. 26,925
Common stock, $.01 par value; authorized shares 5,000,000; issued
and outstanding shares 2,692,500.................................. 27
Additional paid-in capital......................................... 26,898
Retained earnings.................................................. 149
Accumulated other comprehensive loss............................... (38)
Note receivable due from stockholder............................... (250)
--------
Total stockholders' equity....................................... 53,711
--------
Total liabilities and stockholders' equity....................... $125,231
========

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
Period from July 28, 1998 (date of inception) to December 31, 1998
(Dollars in Thousands)

[Download Table]

Net sales.............................................................. $67,490
Cost of goods sold..................................................... 45,234
-------
Gross profit........................................................... 22,256
Selling, general, and administrative expenses.......................... 19,685
-------
Operating income....................................................... 2,571
Interest expense....................................................... 1,949
-------
Income before income taxes............................................. 622
Income taxes........................................................... 473
-------
Net income............................................................. $ 149
=======

See accompanying notes to consolidated financial statements.

F-164

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QDSP HOLDINGS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from July 28, 1998 (date of inception) to December 31, 1998
(Dollars in Thousands)

[Enlarge/Download Table]

Accumulated Note
Additional Other Receivable Total
Preferred Common Paid-In Retained Comprehensive Due From Stockholders'
Stock Stock Capital Earnings Loss Stockholder Equity
--------- ------ ---------- -------- ------------- ----------- -------------

Initial capital
contributions.......... $26,925 $27 $26,898 $-- $ -- $ -- $53,850
Net income.............. -- -- -- 149 -- -- 149
Currency translation
adjustment............. -- -- -- -- (38) -- (38)
-------
Comprehensive loss...... 111
Note receivable due from
stockholder............ -- -- -- -- -- (250) (250)
------- --- ------- ---- ---- ----- -------
Balance at December 31,
1998................... $26,925 $27 $26,898 $149 $(38) $(250) $53,711
======= === ======= ==== ==== ===== =======

See accompanying notes to consolidated financial statements.

F-165

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QDSP HOLDINGS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
Period from July 28, 1998 (date of inception) to December 31, 1998
(Dollars in Thousands)

[Download Table]

Operating activities
Net income......................................................... $ 149
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization.................................... 1,399
Amortization of deferred financing costs......................... 104
Deferred income taxes............................................ 51
Changes in operating assets and liabilities (net of acquired
businesses):
Accounts receivable............................................ (509)
Inventories.................................................... (2,881)
Other current assets........................................... (746)
Accounts payable and accrued expenses.......................... (420)
--------
Net cash used in operating activities........................ (2,853)
Investing activities
Acquisition of businesses, net of cash acquired.................... (95,389)
Capital expenditures............................................... (626)
--------
Net cash used in investing activities........................ (96,015)
Financing activities
Initial capital contributions...................................... 53,850
Proceeds from long-term debt....................................... 47,000
Proceeds from revolving credit facility............................ 1,542
Payments on revolving credit facility.............................. (290)
Payment of deferred financing costs................................ (1,819)
--------
Net cash provided by financing activities.................... 100,283
Effect of exchange rate changes on cash.............................. 17
--------
Increase in cash and cash equivalents................................ 1,432
Cash and cash equivalents at beginning of period..................... --
--------
Cash and cash equivalents at end of period........................... $ 1,432
========

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from July 28, 1998 (date of inception) to December 31, 1998
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

QDSP Holdings, Inc. (the Company) was formed to act as a holding company to
acquire heavy-duty aftermarket parts distribution and service companies. The
Company's operating subsidiaries distribute heavy-duty replacement parts from
distribution centers and provide services for heavy-duty vehicles primarily
throughout the United States. The Company's customers include independent
distributors, general repair shops, independent trucking businesses, major
fleets, and other operators of heavy-duty equipment.

The consolidated financial statements are presented as of December 31, 1998,
and for the period from July 28, 1998 (date of inception) through December 31,
1998.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
cores and finished goods.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated
depreciation. Depreciation is principally computed using the straight-line
method over the respective estimated useful lives of the assets for financial
reporting purposes as follows: 5 to 20 years for machinery and equipment, 5 to
10 years for furniture and fixtures, 5 years for vehicles, 20 years for
buildings and land improvements, and the shorter of the lease term or the
useful life for leasehold improvements. Depreciation expense was $751 for the
period ended December 31, 1998.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of
businesses acquired and is amortized using the straight-line method over 40
years. Accumulated amortization of goodwill was $648 at December 31,1998.

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred Financing Costs

The costs of obtaining financing are capitalized and amortized over the term
of the related financing using the straight-line method which approximates the
interest method. Accumulated amortization of deferred financing costs was $104
at December 31, 1998.

Income Taxes

Deferred taxes are recognized for the tax consequences of the differences
between the financial statement carrying amounts and the tax bases of the
existing assets and liabilities by applying the enacted statutory income tax
rates applicable to the periods when such differences are expected to reverse.
Deferred taxes are recognized for the timing of these differences for financial
reporting and income tax reporting purposes.

Stock Options

The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). The Company recognizes compensation expense to the extent that the
fair value of the Company's stock exceeds the stock option exercise price at
the measurement date. The measurement date is the date at which both the
exercise price and the number of options to be issued are known. No
compensation expense was recognized for the period ended December 31, 1998.

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Foreign Currency Translation

The functional currency for the Company's foreign operations is the
operation's local currency. Accordingly, all balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date and
income statement amounts have been translated using the average exchange rate
for the year. The translation adjustments resulting from the changes in
exchange rates have been reported separately in stockholders' equity as
accumulated other comprehensive income (loss).

Long-Lived Assets

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash and
cash equivalents, trade accounts receivable, other current assets, accounts
payable and accrued expenses approximate fair value because of the short-term
maturity of these instruments.

The Company estimates the fair value of its long-term debt obligations, using
the discounted cash flow method with interest rates currently available for
similar obligations. The carrying amounts reported in the Company's balance
sheet for these obligations approximate fair value as the debt contains
variable interest rates and, as such, approximate fair value on an ongoing
basis.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
To minimize this risk, the Company performs ongoing credit evaluations of
customers' financial condition.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-169

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Acquisitions

Effective July 31, 1998, the Company acquired 100% of the stock of (i)
Fleetpride, Inc., (ii) Truck City Parts, Inc., (iii) Wheatly Truck Parts, Inc.,
and (iv) Universal Joint Sales, Inc. Effective July 31, 1998, the Company
purchased certain net assets of (i) Automotive Sales Company, Inc. (ASCO) and
(ii) Drive Train Southwest, Inc. (Drive Train). Effective August 7, 1998, the
Company acquired 100% of the stock of (i) SLM Group, Inc., (ii) Holt, Inc., and
(iii) City Spring Works, Inc. The aggregate purchase price of these
acquisitions (collectively, the Acquired Companies) was approximately $95,389
including expenses relating to the purchase of approximately $6,420 and net of
acquired cash of $7,046. Included in the aggregate purchase price is $5,014 of
estimated additional payments based on working capital adjustments. The
financial statements reflect the preliminary purchase price which will be
finalized upon the determination of additional earn-out payments contingent
upon the attainment of specified future earnings levels by certain of the
Acquired Companies. The Company has not included these earn-out payments in the
aggregate purchase price and believes that such payments will not exceed
$2,100. The purchase price allocation will be finalized upon a final valuation
of certain assets of the Acquired Companies. The allocation of the preliminary
purchase price to the fair values of significant assets and liabilities as of
the dates of purchase is as follows:

[Download Table]

Purchase price..................................................... $ 95,389
Assets acquired/liabilities assumed:
Accounts receivable.............................................. 16,751
Inventories...................................................... 28,204
Other current assets............................................. 3,555
Property, plant, and equipment................................... 6,796
Accounts payable................................................. (11,131)
Accrued expenses................................................. (11,018)
--------
Goodwill........................................................... $ 62,232
========

The acquisitions were accounted for under the purchase method of accounting
and, as such, the results of the operations of the Acquired Companies
subsequent to the dates of acquisition have been included in the consolidated
operations of the Company.

4. Inventories

Inventories at December 31, 1998, consist of the following:

[Download Table]

Cores................................................................ $ 2,746
Finished goods....................................................... 28,559
-------
$31,305
=======

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Property, Plant, and Equipment

Property, plant, and equipment consist of the following at December 31, 1998:

[Download Table]

Land and land improvements........................................... $ 118
Buildings and leasehold improvements................................. 2,154
Machinery and equipment.............................................. 2,968
Furniture and fixtures............................................... 374
Vehicles............................................................. 1,795
------
7,409
Less: Accumulated depreciation....................................... (742)
------
$6,667
======

6. Accrued Expenses

Accrued expenses at December 31, 1998, are summarized as follows:

[Download Table]

Accrued acquisition costs........................................... $ 5,014
Employee compensation and benefits.................................. 2,338
Other............................................................... 4,824
-------
$12,176
=======

7. Long-Term Debt

Long-term debt at December 31, 1998, is summarized as follows:

[Download Table]

Term loans.......................................................... $47,000
Revolving credit facility........................................... 1,252
-------
48,252
Less: Current maturities............................................ (1,270)
-------
$46,982
=======

On August 7, 1998, the Company entered into a credit agreement which provided
for a $20.0 million term loan (Term Loan A) and a $27.0 million term loan (Term
Loan B) to fund business acquisitions. Term Loan A and Term Loan B are payable
in quarterly principal installments ranging from $68 to $6,345 through August
7, 2004 and August 7, 2006, respectively.

The credit agreement also includes a revolving credit facility (the Credit
Facility) which is available to the Company for working capital purposes and
for business acquisitions. Maximum borrowings under the Credit Facility are
$28.0 million (including letters of credit of up to $5.0 million). Commitment
fees on the unused balance of 0.375% to 0.50% are payable monthly.

At the Company's election, amounts outstanding under the term loans and the
Credit Facility will bear interest, payable not less than quarterly, at either
the bank's Prime Rate (7.75% at December 31, 1998) plus 0.75% to 2.0% or the
London Interbank Offered Rate (LIBOR) (5.07% at December 31, 1998) plus 2.0% to
3.25%. The blended interest rate for the period ended

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1998, was 8.23%. The funds available to be advanced may not exceed
4.5 times the Company's earnings before interest, income taxes, depreciation,
and amortization, as defined in the credit agreement. The Company had $640
available to be advanced in additional borrowings at December 31, 1998.

The credit agreement covering the term loans and Credit Facility contain
covenants, which among other things, require the Company to maintain certain
financial ratios. The Company was in compliance with such covenants at December
31, 1998. The term loans and the Credit Facility are collateralized by
substantially all of the assets of the Company.

Annual maturities of the Company's long-term debt are as follows at December
31, 1998:

[Download Table]

1999................................................................. $ 1,270
2000................................................................. 1,770
2001................................................................. 3,270
2002................................................................. 4,270
2003................................................................. 4,770
2004 and thereafter.................................................. 32,902
-------
$48,252
=======

8. Capital Leases

Vehicles and equipment under capital leases consist of the following at
December 31, 1998:

[Download Table]

Vehicles.............................................................. $ 449
Machinery and equipment............................................... 172
-----
621
Less: Accumulated amortization........................................ (125)
-----
$ 496
=====

Future minimum lease payments under capital leases with initial or remaining
terms of one year or more consisted of the following at December 31, 1998:

[Download Table]

1999................................................................... $333
2000................................................................... 167
2001................................................................... 77
2002................................................................... 23
----
Total minimum payments................................................. 600
Less: Amounts representing interest.................................... 91
----
Present value of minimum lease payments................................ 509
Less: Current portion.................................................. 333
----
Total long-term portion................................................ $176
====

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. Operating Leases

The Company leases buildings under operating leases for some of its
distribution and service centers from certain stockholders of the Company. The
leases expire at various dates through 2008. Rent expense under the operating
leases to these related parties was $965 for the period ended December 31,
1998.

Additionally, the Company leases buildings and machinery and equipment under
operating leases from unaffiliated entities. The leases expire on various dates
through 2003. Rent expense for such leases was $299 for the period ended
December 31, 1998.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows at December 31, 1998:

[Download Table]

1999................................................................. $ 3,064
2000................................................................. 2,606
2001................................................................. 2,341
2002................................................................. 2,089
2003................................................................. 1,466
2004 and thereafter.................................................. 1,090
-------
$12,656
=======

10. Income Taxes

Income tax expense consists of the following at December 31, 1998:

[Download Table]

Current:
Federal............................................................... $338
State................................................................. 77
Foreign............................................................... 7
----
422
Deferred................................................................ 51
----
$473
====

Reconciliation of income taxes computed at the U.S. federal statutory tax
rate to income tax expense is as follows at December 31, 1998:

[Download Table]

Income taxes at U.S. federal statutory rate............................ $211
State income taxes, net of federal tax benefit......................... 51
Nondeductible goodwill amortization.................................... 206
Other, net............................................................. 5
----
Income tax expense..................................................... $473
====

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant components of the Company's deferred income taxes at December 31,
1998, are as follows:

[Download Table]

Deferred tax assets:
Inventory obsolescence reserve..................................... $1,178
Inventory capitalization........................................... 273
Allowance for doubtful accounts.................................... 154
Employee compensation and benefits................................. 443
Other.............................................................. 108
------
2,156
Deferred tax liabilities:
Amortization of deductible goodwill................................ (84)
Accelerated depreciation........................................... (26)
------
(110)
------
Net deferred tax asset............................................... $2,046
======

11. Related Party Transactions

The Company paid Aurora Capital Partners and its affiliates (ACP), the
controlling stockholders of the Company, $3,542 in fees for services provided
in connection with companies acquired during the period ended December 31,
1998. These costs incurred as a result of the acquisitions during 1998 were
included in the aggregate purchase price. In addition, ACP was paid management
fees of $104 for the period ended December 31, 1998.

As described in Note 9, the Company leases some buildings from certain
stockholders of the Company. Additionally, the Company has a note receivable
from a certain officer and stockholder of the Company, bearing interest at the
prime rate (7.75% at December 31, 1998), due August 19, 2003, and
collateralized by the stockholder's capital stock.

12. Preferred Stock

Preferred stock is nonvoting. The holders of preferred stock are entitled to
receive dividends at the rate of 10% per annum on the stated value ($100 per
share of preferred stock), plus any dividends in arrears. Accumulated dividends
in arrears aggregate approximately $1,122 as of December 31, 1998. In the event
of any voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of the preferred stock are entitled to a
liquidation preference equal to $100 per share plus accrued but unpaid
dividends.

Subject to certain restrictions as defined in the agreement, the Company may
redeem all or a portion of the preferred stock at any time. The preferred
stockholders also may require the Company to redeem all or any portion of the
preferred stock generally upon the occurrence of certain defined events. At the
option of the Company, the preferred stock is exchangeable, in whole or in
part, any time on or after January 1, 2000, into subordinated debentures due
January 1, 2011.

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. Stock Options

The Company's 1998 Stock Incentive Plan (the Plan), provides incentives to
employees and nonemployee directors of the Company by granting them ownership
awards of up to 600,000 shares of the Company's common stock. The Plan is
administered by a committee of the Board of Directors which has the authority
to determine the employees to whom awards will be made, the amount of the
awards, and other terms and conditions of the awards. Under the Plan, awards
may be granted in the form of stock options, stock appreciation rights, stock
purchase warrants, performance units, or performance shares and are generally
subject to time and performance vesting. Options are generally granted at not
less than the fair value on the date of grant. The options expire ten years
from the date of the grant. Options available for grant are 218,127 at December
31, 1998. Awards pursuant to the Plan granted in 1998 were issued in the form
of stock options. The stock options vest over periods of time ranging from
immediate vesting to vesting ratably over a five-year period.

A summary of the status of the Company's option plan is presented below:

[Download Table]

Exercise
Options Price Range
------- -----------

Balance at July 28, 1998 -- $ --
Options granted.......................................... 381,873 10
------- ----
Balance at December 31, 1998............................. 381,873 $ 10
======= ====
Exercisable at December 31, 1998......................... 111,124
=======

Had compensation expense for the Company's Plan been determined in accordance
with Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), the Company's pro forma net income would
have been approximately $172 (net of tax benefit of $108) less than the net
income reported in the statement of operations for the period ended December
31, 1998.

The fair value of each option is estimated on the date of grant using the
Minimum Value method for nonpublic companies with risk-free interest rates of
5.25% and expected award lives of five years for 1998. The Company has not paid
and does not anticipate paying dividends; therefore, the expected dividend
yield is assumed to be zero. The weighted-average fair value of all options
granted during 1998 was $2.34. The weighted-average remaining contractual life
of the options is 9.8 years at December 31, 1998.

Because the Company's awards have characteristics significantly different
from those of traded stock options, and because changes in subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its awards.

14. Employee Savings Plan

The Company sponsors several defined-contribution plans to provide
substantially all employees of the Company an opportunity to accumulate
personal funds for their retirement, subject to minimum duration of employment
requirements. Employees may contribute up to 16% of before-tax earnings to
substantially all of these plans. The Company matches a portion of the
employees' basic

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QDSP HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

voluntary contributions as determined by the provisions of each plan. Company
matching contributions to the plans were approximately $147 for the period
ended December 31, 1998.

15. Subsequent Events

Effective March 1999, the Company purchased all of the outstanding stock of
TBS Incorporated for approximately $1,685. Goodwill of $1,026 was recognized in
the acquisition. On March 2, 1999, the Company purchased all of the outstanding
stock of New England Truck & Auto Service, Inc. for approximately $963.
Goodwill of $754 was recognized in the acquisition. On March 2, 1999, the
Company purchased substantially all the assets of Clutch & Brake, Inc. for
approximately $4,200. Goodwill of $3,011 was recognized in the acquisition.

Effective February 1999, the Company sold substantially all of the assets of
Stats Remanufacturing Center, Inc., a subsidiary of Holt, Inc., to
HaldexMidland Corporation for proceeds approximating $417. The net assets sold
and gain on the sale of assets approximated $481 and $64, respectively.

Effective March 1999, the Company sold approximately 50,279 shares of
preferred stock and approximately 502,790 shares of common stock for $5,028 and
$5,028, respectively. A portion of the proceeds from the sale of these shares
was used for the acquisitions described above.

16. Impact of Year 2000 (Unaudited)

The Company is heavily reliant on computerized information systems, and the
Company has chosen to upgrade its current systems to correct Year 2000
compliance issues. The upgrades are expected to be in place by midyear 1999.
While the Company believes its planning efforts are adequate to address its
Year 2000 compliance issues, there can be no assurance that the systems of all
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on the Company.
The Company has incurred no costs in relation to the upgrades as of December
31, 1998, and anticipates costs of $200 in 1999 to complete the project.

17. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the consolidated statement of cash flows for the period
ending December 31, 1998:

[Download Table]

Cash paid for:
Income taxes......................................................... $ 866
Interest............................................................. 1,090

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Supplemental Information

F-177

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QDSP HOLDINGS, INC.

CONSOLIDATING BALANCE SHEET

December 31, 1998
(Dollars in Thousands)

[Enlarge/Download Table]

Truck Wheatley Universal Automotive City
QDSP City Truck Joint Sales SLM Spring
Holdings, QDSP, Fleetpride, Parts, Parts, Sales, Company, Holt, Group, Works,
Inc. Inc. Inc. Inc. Inc. Inc. Inc. Inc. Inc. Inc. Eliminations
--------- -------- ----------- ------- -------- --------- ---------- ------ ------- ------ ------------

ASSETS
------
Current assets:
Cash and cash
equivalents...... $ 41 $ (291) $ 235 $ 14 $ 190 $ 124 $ 8 $ 169 $ 783 $ 159 $ --
Accounts
receivable,
net.............. -- -- 2,451 1,246 894 2,131 1,666 925 7,409 757 (54)
Inventories....... -- -- 2,759 3,679 1,570 5,502 2,247 3,226 11,399 889 34
Deferred income
taxes............ -- -- 269 292 238 322 26 264 380 210 --
Other current
assets........... 120 1,349 53 -- 196 368 6 106 56 (75) --
------- -------- ------- ------- ------ ------- ------- ------ ------- ------ ---------
Total current
assets......... 161 1,058 5,767 5,231 3,088 8,447 3,953 4,690 20,027 1,940 (20)
Property, plant,
and equipment,
net............... -- 151 1,238 919 219 1,125 723 326 1,614 352 --
Investment in
subsidiaries...... 53,190 102,725 -- -- -- -- -- -- -- -- (155,915)
Intercompany
receivable........ 504 1,458 -- -- 2 411 -- -- 343 300 (3,018)
Goodwill, net...... -- -- 4,239 7,896 3,153 8,675 5,531 3,121 25,006 3,963 --
Deferred financing
costs, net........ -- 1,820 113 166 73 219 116 81 546 73 (1,492)
Deferred income
taxes............. -- -- -- -- 6 6 -- -- 179 -- (146)
Other assets....... -- 262 56 -- -- 370 88 (11) 94 19 --
------- -------- ------- ------- ------ ------- ------- ------ ------- ------ ---------
$53,855 $107,474 $11,413 $14,212 $6,541 $19,253 $10,411 $8,207 $47,809 $6,647 $(160,591)
======= ======== ======= ======= ====== ======= ======= ====== ======= ====== =========
LIABILITIES AND
---------------
STOCKHOLDERS' EQUITY
---------------------
Accounts payable... $ -- $ -- $ 1,845 $ 863 $ 505 $ 2,325 $ 1,103 $ 980 $ 2,646 $ 162 $ --
Accrued expenses... -- 5,235 776 893 107 587 470 264 3,072 781 (9)
Current portion of
long-term debt.... -- 1,270 104 151 65 201 106 74 501 68 (1,270)
Current portion of
capital lease
obligations....... -- -- 191 -- -- 29 -- 36 77 -- --
Intercompany
payable........... 2 1,607 230 429 14 92 58 561 -- 25 (3,018)
------- -------- ------- ------- ------ ------- ------- ------ ------- ------ ---------
Total current
liabilities.... 2 8,112 3,146 2,336 691 3,234 1,737 1,915 6,296 1,036 (4,297)
Long-term debt,
less current
portion........... -- 46,982 3,738 5,447 2,350 7,238 3,832 2,682 18,012 2,431 (45,730)
Capital lease
obligations, less
current portion... -- -- 70 -- -- 16 -- 78 12 -- --
Deferred income
taxes............. -- -- 7 52 -- -- 51 26 -- 10 (146)
Other long-term
liabilities....... -- -- -- -- -- -- -- 101 53 -- --
Stockholders'
equity:
Preferred stock... 26,925 -- -- -- -- -- -- -- --
Common stock...... 27 -- 38 10 62 136 -- 27 2 20 (295)
Additional paid-
in capital....... 26,898 53,190 4,299 6,261 3,295 8,531 4,760 3,436 23,284 3,053 (110,109)
Retained earnings
(accumulated
deficit)......... 3 (560) 115 106 143 98 31 (58) 188 97 (14)
Accumulated other
comprehensive
loss............. -- -- -- -- -- -- -- -- (38) -- --
Note receivable
due from
stockholder...... -- (250) -- -- -- -- -- -- -- -- --
------- -------- ------- ------- ------ ------- ------- ------ ------- ------ ---------
Total
stockholders'
equity......... 53,853 52,380 4,452 6,377 3,500 8,765 4,791 3,405 23,436 3,170 (110,418)
------- -------- ------- ------- ------ ------- ------- ------ ------- ------ ---------
Total
liabilities and
stockholders'
equity......... $53,855 $107,474 $11,413 $14,212 $6,541 $19,253 $10,411 $8,207 $47,809 $6,647 $(160,591)
======= ======== ======= ======= ====== ======= ======= ====== ======= ====== =========

Consolidated
------------

ASSETS
------
Current assets:
Cash and cash
equivalents...... $ 1,432
Accounts
receivable,
net.............. 17,425
Inventories....... 31,305
Deferred income
taxes............ 2,001
Other current
assets........... 2,179
------------
Total current
assets......... 54,342
Property, plant,
and equipment,
net............... 6,667
Investment in
subsidiaries...... --
Intercompany
receivable........ --
Goodwill, net...... 61,584
Deferred financing
costs, net........ 1,715
Deferred income
taxes............. 45
Other assets....... 878
------------
$125,231
============
LIABILITIES AND
---------------
STOCKHOLDERS' EQUITY
--------------------
Accounts payable... $ 10,429
Accrued expenses... 12,176
Current portion of
long-term debt.... 1,270
Current portion of
capital lease
obligations....... 333
Intercompany
payable........... --
------------
Total current
liabilities.... 24,208
Long-term debt,
less current
portion........... 46,982
Capital lease
obligations, less
current portion... 176
Deferred income
taxes............. --
Other long-term
liabilities....... 154
Stockholders'
equity:
Preferred stock... 26,925
Common stock...... 27
Additional paid-
in capital....... 26,898
Retained earnings
(accumulated
deficit)......... 149
Accumulated other
comprehensive
loss............. (38)
Note receivable
due from
stockholder...... (250)
------------
Total
stockholders'
equity......... 53,711
------------
Total
liabilities and
stockholders'
equity......... $125,231
============

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QDSP HOLDINGS, INC.

CONSOLIDATING STATEMENT OF OPERATIONS

Period from July 28, 1998 (date of inception) to December 31, 1998
(Dollars in Thousands)

[Enlarge/Download Table]

Automotive
QDSP Truck City Wheatley Universal Sales SLM
Holdings, QDSP, Fleetpride, Parts, Truck Joint Sales, Company, Group, City Spring
Inc. Inc. Inc. Inc. Parts, Inc. Inc. Inc. Holt, Inc. Inc. Works, Inc.
--------- ----- ----------- ---------- ----------- ------------ ---------- ---------- ------- -----------

Net sales....... $ -- $ -- $8,619 $5,563 $4,108 $10,243 $7,189 $4,976 $24,182 $2,787
Cost of goods
sold............ -- -- 5,463 3,646 2,604 6,535 4,640 3,377 17,957 1,167
----- ----- ------ ------ ------ ------- ------ ------ ------- ------
Gross profit.... -- -- 3,156 1,917 1,504 3,708 2,549 1,599 6,225 1,620
Selling,
general, and
administrative
expenses....... (9) 764 2,775 1,477 1,158 3,201 2,340 1,568 5,074 1,337
----- ----- ------ ------ ------ ------- ------ ------ ------- ------
Operating income
(loss)......... 9 (764) 381 440 346 507 209 31 1,151 283
Interest
expense, net... -- 176 164 209 90 277 147 103 690 93
----- ----- ------ ------ ------ ------- ------ ------ ------- ------
Income before
income taxes... 9 (940) 217 231 256 230 62 (72) 461 190
Income taxes.... 6 (380) 102 125 113 132 31 (14) 273 93
----- ----- ------ ------ ------ ------- ------ ------ ------- ------
Net income
(loss)......... $ 3 $(560) $ 115 $ 106 $ 143 $ 98 $ 31 $ (58) $ 188 $ 97
===== ===== ====== ====== ====== ======= ====== ====== ======= ======

Eliminations Consolidated
------------ ------------

Net sales....... $(177) $67,490
Cost of goods
sold........... (155) 45,234
------------ ------------
Gross profit.... (22) 22,256
Selling,
general, and
administrative
expenses....... -- 19,685
------------ ------------
Operating income
(loss)......... (22) 2,571
Interest
expense, net... -- 1,949
------------ ------------
Income before
income taxes... (22) 622
Income taxes.... (8) 473
------------ ------------
Net income
(loss)......... $ (14) $ 149
============ ============

F-179

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QDSP HOLDINGS, INC.

UNAUDITED CONSOLIDATED BALANCE SHEET
At June 30, 1999
(Dollars in Thousands, Except per Share Data)

[Download Table]

ASSETS
------
Current assets:
Cash and cash equivalents.......................................... $ 6,878
Accounts receivable, net of allowance for doubtful accounts of
$511.............................................................. 21,431
Inventories........................................................ 32,330
Deferred income taxes.............................................. 2,001
Other current assets............................................... 4,308
--------
Total current assets............................................. 66,948
Property, plant, and equipment, net................................ 7,307
Goodwill, net...................................................... 65,884
Deferred financing costs, net...................................... 1,668
Deferred income taxes.............................................. 45
Other assets....................................................... 1,016
--------
Total assets..................................................... $142,868
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable................................................... $ 11,059
Accrued expenses................................................... 7,767
Current portion of long-term debt.................................. 2,172
Current portion of capital lease obligations....................... 227
--------
Total current liabilities........................................ 21,225
Long-term debt, less current portion............................... 55,142
Capital lease obligations, less current portion.................... 201
Other long-term liabilities........................................ 33
Stockholders' equity:
Preferred stock, $100 stated value; authorized shares 500,000;
issued and outstanding shares 325,730............................. 32,573
Common stock, $.01 par value; authorized shares 5,000,000; issued
and outstanding shares 3,257,300.................................. 91
Additional paid-in capital......................................... 32,482
Retained earnings.................................................. 1,385
Accumulated other comprehensive loss............................... (38)
Note receivable due from stockholder............................... (226)
--------
Total stockholders' equity....................................... 66,267
--------
Total liabilities and stockholders' equity....................... $142,868
========

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1999
(Dollars in Thousands)

[Download Table]

Net sales.............................................................. $91,983
Cost of goods sold..................................................... 62,973
-------
Gross profit........................................................... 29,010
Selling, general, and administrative expenses.......................... 23,828
-------
Operating income....................................................... 5,182
Interest expense....................................................... 2,425
-------
Income before income taxes............................................. 2,757
Income taxes........................................................... 1,521
-------
Net income and comprehensive income.................................... $ 1,236
=======

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1999
(Dollars in Thousands)

[Enlarge/Download Table]

Balance at December 31,
1998................... $26,925 $27 $26,898 $ 149 $(38) $(250) $53,711
Capital contributions... 5,648 64 5,584 -- -- -- 11,296
Net income and
comprehensive income... -- -- -- 1,236 -- -- 1,236
Note receivable due from
stockholder............ -- -- -- -- -- 24 24
------- --- ------- ------ ---- ----- -------
Balance at June 30,
1999................... $32,573 $91 $32,482 $1,385 $(38) $(226) $66,267
======= === ======= ====== ==== ===== =======

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1999
(Dollars in Thousands)

[Download Table]

Operating activities
Net income and comprehensive income................................. $ 1,236
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization..................................... 1,593
Amortization of deferred financing costs.......................... 131
Changes in operating assets and liabilities (net of acquired
businesses):
Accounts receivable............................................. (2,769)
Inventories..................................................... 702
Other current assets............................................ (1,820)
Accounts payable and accrued expenses........................... (4,633)
-------
Net cash used in operating activities......................... (5,560)
Investing activities
Acquisition of businesses, net of cash acquired..................... (7,869)
Capital expenditures................................................ (1,094)
-------
Net cash used in investing activities......................... (8,963)
Financing activities
Capital contributions............................................... 11,296
Payments on long-term debt.......................................... (635)
Proceeds from revolving credit facility............................. 9,655
Payment of deferred financing costs................................. (347)
-------
Net cash provided by financing activities..................... 19,969
-------
Increase in cash and cash equivalents................................. 5,446
Cash and cash equivalents at beginning of period...................... 1,432
-------
Cash and cash equivalents at end of period............................ $ 6,878
=======

See accompanying notes to consolidated financial statements.

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QDSP HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

The consolidated financial statements are presented as of June 30, 1999, and
for the period from January 1, 1999 through June 30, 1999.

2. Summary of Significant Accounting Policies

Principles of Consolidation

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
cores and finished goods.

Property, Plant, and Equipment

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of
businesses acquired and is amortized using the straight-line method over 40
years.

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QDSP HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred Financing Costs

The costs of obtaining financing are capitalized and amortized over the term
of the related financing using the straight-line method which approximates the
interest method.

Income Taxes

Stock Options

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

F-185

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QDSP HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Use of Estimates

3. Acquisitions

On March 1, 1999, the Company acquired all of the capital stock of TBS, Inc.
for approximately $1.7 million in cash. The Company has allocated $0.8 million
of the purchase price to the identified assets and liabilities. The acquisition
was accounted for as a purchase and the consolidated financial statements for
the Company include income since the date of acquisition.

On March 2, 1999, the Company acquired all of the capital stock of New
England Truck & Auto Service, Inc. for approximately $1.0 million in cash. The
Company has allocated $0.3 million of the purchase price to the identified
assets and liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

On March 2, 1999, the Company acquired substantially all of the assets of
Clutch & Brake, Inc. for approximately $4.2 million in cash. The Company has
allocated $1.7 million of the purchase price to the identified assets and
liabilities. The acquisition was accounted for as a purchase and the
consolidated financial statements for the Company include income since the date
of acquisition.

4. Inventories

Inventories at June 30, 1999, consist of the following:

[Download Table]

Cores................................................................ $ 1,618
Finished goods....................................................... 30,712
-------
$32,330
=======

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QDSP HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. Employee Savings Plan

Effective March 1999, the Company merged several defined contribution plans
into one plan for the entire Company. Under the terms of the new plan,
employees may contribute up to 15% of before-tax earnings. The Company matches
a portion of the employee's voluntary contribution as determined by the
provisions of the plan.

6. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the consolidated statement of cash flows for the six
months ending June 30, 1999:

[Download Table]

Cash paid for:
Income taxes........................................................ $1,120
Interest............................................................ 3,700

7. Equity

In March 1999, the Company issued approximately 564,800 shares of common
stock and 56,480 shares of preferred stock receiving proceeds of approximately
$11.3 million. A portion of the proceeds were used to fund the acquisitions
described in note number 3.

8. Subsequent events

On September 30, 1999, HDA Parts System, Inc. purchased the Company. This was
accounted for as a purchase. The unaudited financial statements have not been
affected by this transaction.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
SLM Group, Inc.

We have audited the accompanying consolidated balance sheet of SLM Group,
Inc. and Subsidiaries (the Company) as of August 7, 1998, and the related
consolidated statements of income, stockholders' equity and cash flows for the
period from April 1, 1998 to August 7, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SLM Group, Inc.
and Subsidiaries at August 7, 1998, and the consolidated results of their
operations and their cash flows for the period from April 1, 1998 to August 7,
1998, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
December 18, 1998

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SLM GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
August 7, 1998
(Dollars in Thousands, Except Per Share Data)

[Download Table]

ASSETS
------
Current assets:
Cash and cash equivalents............................................ $ 671
Accounts receivable, less allowance for doubtful accounts of $60..... 6,550
Other receivables.................................................... 301
Inventories.......................................................... 10,375
Deferred income taxes................................................ 241
Prepaid expenses and other current assets............................ 386
-------
Total current assets............................................... 18,524
Property, plant and equipment, net..................................... 1,773
Deferred income taxes.................................................. 183
Other assets........................................................... 165
-------
Total assets....................................................... $20,645
=======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 2,698
Accrued expenses..................................................... 1,766
Income taxes payable................................................. 235
Current portion of long-term debt.................................... 1,055
Current portion of capital lease obligation.......................... 80
-------
Total current liabilities.......................................... 5,834
Long-term debt, less current portion................................... 2,532
Capital lease obligations, less current portion........................ 42
Minority interest...................................................... 41
Stockholders' equity:
Common stock, $.01 par value, 180,000 shares authorized, issued and
outstanding......................................................... 2
Additional paid-in capital........................................... 3,508
Retained earnings.................................................... 8,686
-------
Total stockholders' equity......................................... 12,196
-------
Total liabilities and stockholders' equity......................... $20,645
=======

See accompanying notes to consolidated financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME
Period from April 1, 1998 to August 7, 1998
(Dollars in Thousands)

[Download Table]

Net sales.............................................................. $21,946
Cost of goods sold..................................................... 15,707
-------
Gross profit........................................................... 6,239
Selling, general, and administrative expenses.......................... 5,404
-------
Operating income................................................... 835
Interest expense....................................................... (284)
Other income, net...................................................... 79
-------
Income before income taxes............................................. 630
Income taxes........................................................... 272
-------
Net income............................................................. $ 358
=======

See accompanying notes to consolidated financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Period from April 1, 1998 to August 7, 1998
(Dollars in Thousands)

[Download Table]

Additional Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------ ---------- -------- -------------

Balance at April 1, 1998............... $ 2 $ 59 $8,328 $ 8,389
Net income............................. -- -- 358 358
Capital contribution................... -- 3,449 -- 3,449
--- ------ ------ -------
Balance at August 7, 1998.............. $ 2 $3,508 $8,686 $12,196
=== ====== ====== =======

See accompanying notes to consolidated financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
Period from April 1, 1998 to August 7, 1998
(Dollars in Thousands)

[Download Table]

Operating activities
Net income........................................................... $ 358
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization...................................... 209
Deferred income taxes.............................................. (258)
Gain on sale of fixed assets....................................... (16)
Changes in operating assets and liabilities:
Trade accounts receivable........................................ (759)
Other receivables................................................ 2,431
Inventories...................................................... 817
Prepaid expenses and other assets................................ 617
Accounts payable and accrued expenses............................ (152)
Income taxes payable............................................. 180
-------
Net cash provided by operating activities...................... 3,427
Investing activities
Proceeds on the sale of fixed assets................................. 200
Capital expenditures................................................. (246)
-------
Net cash used in investing activities.......................... (46)
Financing activities
Net payments on revolving lines of credit............................ (4,000)
Payments on long-term debt........................................... (194)
-------
Net cash used in financing activities.......................... (4,194)
-------
Net decrease in cash and cash equivalents............................ (813)
Cash and cash equivalents at April 1, 1998........................... 1,484
-------
Cash and cash equivalents at August 7, 1998.......................... $ 671
=======

See accompanying notes to consolidated financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from April 1, 1998 to August 7, 1998
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

SLM Group, Inc. and Subsidaries (the Company) distributes heavy duty truck
parts and equipment to retail and wholesale customers, and provides related
repair services. The Company's primary operations are located in and service
Texas, Oregon, northern Mexico and Great Britain-based customers.

Effective August 7, 1998, the Company was sold to Quality Distribution
Service Partners, Inc.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries. The Company's subsidiaries consist of SLM Group, Inc. and SLM
Power Group, Inc. and subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed using the straight-line method over the
respective estimated useful lives of the assets for financial reporting
purposes as follows: 10 to 20 years for buildings and improvements, 3 to 10
years for machinery and equipment, 5 to 7 years for furniture and fixtures, 5
years for vehicles, and the shorter of the lease term or the useful life for
leasehold improvements. Depreciation and amortization was $209 for the period
ended August 7, 1998.

Income Taxes

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Long-Lived Assets

The Company evaluates its long-lived assets on an ongoing basis. Such assets
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the related asset may be impaired. Whether
assets to be held and used are impaired is measured by a comparison of the
carrying amount of the asset to future undiscounted cash flows expected to be
generated by the asset. If the asset is determined to be impaired, the loss
recognized is measured by the amount by which the carrying value of the asset
exceeds its fair value.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash and
cash equivalents, trade accounts receivable, prepaid expenses and other current
assets, accounts payable, accrued expenses and other current liabilities
approximate fair value because of the short-term maturity of these instruments.

The carrying amounts reported in the Company's balance sheets for variable-
rate long-term debt, including current portion, approximate fair value, as the
underlying long-term debt instruments are comprised of notes that are repriced
on a short-term basis.

The Company estimates the fair value of fixed rate long-term debt obligations
including current portion, using the discounted cash flow method with interest
rates currently available for similar obligations. The carrying amounts
reported in the Company's balance sheets for these obligations approximate fair
value.

Concentration of Credit Risk

Use of Estimates

F-194

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3. Inventories

Inventories at August 7, 1998 consist of the following:

[Download Table]

Cores.............................................................. $ 900
Trucks............................................................. 1,237
Finished goods..................................................... 8,238
-------
$10,375
=======

4. Property, Plant and Equipment

Property, plant and equipment consist of the following at August 7, 1998:

[Download Table]

Land............................................................... $ 118
Building and leasehold improvements................................ 1,842
Machinery and equipment............................................ 2,944
Furniture and fixtures............................................. 103
Vehicles........................................................... 1,013
------
6,020
Less: Accumulated depreciation..................................... 4,247
------
$1,773
======

5. Accrued Expenses

Accrued expenses at August 7, 1998 are summarized as follows:

[Download Table]

Employee compensation and benefits................................. $ 667
Other.............................................................. 1,099
------
$1,766
======

6. Long-Term Debt

Long-term debt consists of the following at August 7, 1998:

[Download Table]

Revolving line of credit........................................... $ 600
Term loans......................................................... 1,745
Notes payable to former shareholder................................ 1,242
------
3,587
Less: Current maturities........................................... 1,055
------
$2,532
======

The Company entered into a credit agreement on September 20, 1995, which
provided for revolving lines of credit. The first line of credit (Revolver I)
is available to the Company for working capital purposes. Funds available to be
advanced under Revolver I may not exceed the lesser of (i) $7.0 million or (ii)
80% of eligible accounts receivable and the lesser of 50% of eligible inventory

F-195

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

or $3.0 million, as defined in the credit agreement. Revolver I matures on
August 1, 1999. The Company had $6.2 million available to be advanced in
additional borrowings on Revolver I at August 7, 1998. The second line of
credit (Revolver II) was available to the Company for capital expenditures and
had a maximum borrowing base of $1.0 million. Revolver II matured on August 1,
1998. The third line of credit (Revolver III) was available to a subsidiary of
the Company, Power Equipment International, Inc., and had a maximum borrowing
base of $2.0 million. Revolver III matured on August 1, 1998. No outstanding
balances remained at August 7, 1998 on Revolver II or Revolver III.

At the Company's election, amounts outstanding under Revolver I bear interest
at either the bank's prime rate (8.5% at August 7, 1998), payable monthly, or
the London Interbank Offered Rate (LIBOR) plus 2.5%, payable on the last day of
the respective LIBOR term.

The credit agreement also provided for a $726 term loan (Term Loan I) and
subsequent amendments made to the credit agreement provided for a $625 term
loan (Term Loan II) and an $865 term loan (Term Loan III). Term Loan I, Term
Loan II and Term Loan III are payable in monthly principal and interest
installments of $8, $8 and $14, respectively, and one remaining balance payment
at the maturity date of August 2000, August 2001 and August 2002, respectively.
The term loans bear interest at approximately 8.1%.

The credit agreement covering the revolving lines of credit and term loans
requires the Company to comply with certain financial and nonfinancial
covenants. The revolving lines of credit and term loans are collateralized by
substantially all of the assets of the Company.

The notes payable to a former shareholder for repurchase of Company stock are
payable in quarterly principal installments of $54 through October 2004, bear
interest payable quarterly at 9.0% and are secured by the Company's stock.

The Company had several notes payable to related parties, bearing interest at
rates varying between 8.0% and 9.25%, which were paid in full during the period
ended August 7, 1998.

Annual maturities of the Company's long-term debt are as follows at August 7,
1998:

[Download Table]

1999................................................................ $1,055
2000................................................................ 962
2001................................................................ 813
2002................................................................ 379
2003................................................................ 216
2004 and thereafter................................................. 162
------
$3,587
======

7. Leases

The Company has entered into a capital lease for equipment that expires in
2001. The Company also leases retail and office facilities under operating
leases that expire at various dates through 2004.

F-196

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In most cases, management expects that leases will be renewed or replaced by
other similar leases in the normal course of business. Future minimum lease
payments required under capital and operating leases that have initial or
remaining noncancelable terms in excess of one year are as follows:

[Download Table]

Capital Operating
Leases Leases
------- ---------

Periods ending August 7:
1999................................................... $ 80 $ 464
2000................................................... 46 398
2001................................................... -- 279
2002................................................... -- 252
2003 and thereafter.................................... -- 347
---- ------
Total minimum lease payments............................. 126 $1,740
======
Amounts representing interest............................ (4)
----
Present value of minimum lease payments.................. 122
Less: Current portion.................................... 80
----
Total long-term portion.................................. $ 42
====

Rent expense for operating leases was $190 for the period ended August 7,
1998. Equipment leased under capital leases, net of accumulated depreciation of
$106, was $118 at August 7, 1998.

8. Income Taxes

Income tax expense for the period ended August 7, 1998 consisted of the
following:

[Download Table]

Current:
Federal........................................................... $ 462
State............................................................. 68
-----
530
Deferred............................................................ (258)
-----
$ 272
=====

Reconciliation of the income tax rate computed at the U.S. federal statutory
tax rate to the income tax expense is as follows for the period ended August 7,
1998:

[Download Table]

Income taxes at U.S. federal statutory rate.......................... 34.0%
State income taxes, net of federal tax benefit....................... 6.0
Other................................................................ 3.2
----
Income tax expense................................................... 43.2%
====

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant components of the Company's deferred income taxes at August 7,
1998 is as follows:

[Download Table]

Deferred tax assets:
Allowance for doubtful accounts................................... $ 24
Employee compensation and benefits................................ 158
Accelerated depreciation.......................................... 183
Inventory obsolescence reserve.................................... 125
Other............................................................. 50
-----
540
Deferred tax liabilities:
Prepaid expenses.................................................. (116)
-----
Net deferred tax asset.............................................. $ 424
=====

9. Employee Savings Plan

The Company sponsors a 401(k) savings plan. Substantially all full-time
employees upon reaching certain age and service requirements are eligible to
participate in the Plan. Employees may contribute up to 16% of their
compensation with matching contributions equal to 100% on the first $200 and
25% on the remaining contribution up to 6% of eligible salary. Company matching
contributions to the Plan were approximately $38 for the period ended August 7,
1998.

10. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the consolidated statement of cash flows for the period
ended August 7, 1998:

[Download Table]

Cash paid for:
Income taxes........................................................ $372
Interest............................................................ 281

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INDEPENDENT AUDITORS' REPORT

The Board of Directors
SLM Group, Inc.:

We have audited the accompanying combined balance sheets of SLM Group, Inc.
and subsidiaries as of March 31, 1998 and 1997, and the related combined
statements of income and retained earnings, and cash flows for the years then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of SLM Group, Inc. and
subsidiaries as of March 31, 1998 and 1997, and the results of their operations
and their cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ KPMG LLP

San Antonio, Texas
June 4, 1998

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SLM GROUP, INC. AND SUBSIDIARIES

COMBINED BALANCE SHEETS

March 31, 1998 and 1997

[Download Table]

1998 1997
----------- ----------

ASSETS
------
Current assets:
Cash.................................................. $ 1,524,585 1,464,738
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$60,000 in 1998 and 1997........................... 5,790,645 4,807,967
U.S. Government..................................... 432,004 403,795
Other............................................... 681,689 904,828
Inventories........................................... 11,192,157 8,951,248
Prepaid expenses and other current assets............. 483,008 461,183
Current portion of notes receivable................... 34,991 89,374
Income taxes receivable............................... -- 43,710
Deferred income taxes................................. 62,000 27,000
----------- ----------
Total current assets.............................. 20,201,079 17,153,843
Net property and equipment.............................. 6,843,115 6,943,279
Long-term portion of notes receivable................... 50,493 193,736
Deferred income taxes................................... 170,000 136,000
Other assets............................................ 639,814 528,079
----------- ----------
$27,904,501 24,954,937
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Trade accounts payable................................ $ 2,562,759 2,577,616
Accrued expenses...................................... 1,309,673 1,163,901
Current installments of long-term debt................ 796,025 642,318
Other current liabilities............................. 498,608 331,443
Interest-bearing obligations payable under floorplan
arrangements......................................... 320,262 --
----------- ----------
Total current liabilities......................... 5,487,327 4,715,278
Notes payable to bank................................... 4,000,000 4,500,000
Long-term debt, excluding current installments.......... 4,423,897 4,068,711
----------- ----------
Total liabilities................................. 13,911,224 13,283,989
----------- ----------
Minority interest in consolidated partnerships.......... 1,968,193 2,015,239
----------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized, issued and
outstanding 180,000 shares........................... 1,800 1,800
Additional paid-in capital............................ 59,200 59,200
Retained earnings..................................... 11,964,084 9,594,709
----------- ----------
Total stockholders' equity........................ 12,025,084 9,655,709
Commitments.............................................
----------- ----------
$27,904,501 24,954,937
=========== ==========

See accompanying notes to combined financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS

Years Ended March 31, 1998 and 1997

[Download Table]

1998 1997
----------- ----------

Sales................................................ $60,227,048 50,720,719
Cost of sales........................................ 42,335,208 35,469,594
----------- ----------
Gross profit....................................... 17,891,840 15,251,125
Selling, general and administrative expenses......... 13,735,954 12,011,796
----------- ----------
Operating income................................... 4,155,886 3,239,329
----------- ----------
Other income (expense):
Interest expense, net.............................. (660,555) (779,290)
Gain (loss) on sale of property and equipment,
net............................................... 5,718 (67,902)
Foreign currency loss, net......................... (33,668) (22,721)
Flood loss......................................... -- (203,810)
Other, net......................................... 192,865 171,505
----------- ----------
(495,640) (902,218)
----------- ----------
Income before income taxes and minority interest... 3,660,246 2,337,111
Income taxes......................................... (1,337,917) (756,000)
----------- ----------
Income before minority interest.................... 2,322,329 1,581,111
Minority interest in net losses of consolidated
partnerships........................................ 47,046 144,506
----------- ----------
Net income......................................... 2,369,375 1,725,617
Retained earnings, beginning of year................. 9,594,709 7,869,092
----------- ----------
Retained earnings, end of year....................... $11,964,084 9,594,709
=========== ==========

See accompanying notes to combined financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

COMBINED STATEMENTS OF CASH FLOWS

Years Ended March 31, 1998 and 1997

[Download Table]

1998 1997
----------- ----------

Cash flows from operating activities:
Net income.......................................... $ 2,369,375 1,725,617
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 917,188 1,022,134
(Gain) loss on sale of property and equipment,
net.............................................. (5,718) 67,902
Flood loss........................................ -- 203,810
Equity in loss from investment in affiliated
partnership...................................... -- 34,923
Minority interest in net losses of consolidated
partnerships..................................... (47,046) (144,506)
Changes in operating assets and liabilities:
Accounts receivable............................. (787,748) (88,131)
Inventories..................................... (2,240,909) 284,894
Prepaid expenses and other current assets....... (21,825) (239,348)
Deferred income taxes........................... (69,000) (153,000)
Income taxes receivable......................... 43,710 (38,000)
Other assets.................................... (111,735) 30,820
Trade accounts payable.......................... (14,857) 975,573
Accrued expenses................................ 145,772 (569,879)
Other current liabilities....................... 167,165 (129,300)
----------- ----------
Net cash provided by operating activities..... 344,372 2,983,509
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment.................. (1,175,739) (916,993)
Proceeds from sale of property and equipment........ 364,433 88,286
Issuance of notes receivable........................ (33,673) (239,837)
Payments from notes receivable...................... 231,299 245,111
Purchase of investment in affiliated partnership.... -- (53,828)
Acquisition of controlling interest in affiliated
partnership, net of cash acquired.................. -- 22,967
----------- ----------
Net cash used in investing activities......... (613,680) (854,294)
----------- ----------
Cash flows from financing activities:
Net increase (decrease) in interest-bearing
obligations payable under floor plan arrangements.. 320,262 (391,366)
Principal payments on notes payable to bank......... (5,000,000) (4,100,000)
Proceeds from notes payable to bank................. 4,500,000 2,200,000
Principal payments on long-term debt................ (700,107) (656,876)
Proceeds from issuance of long-term debt............ 1,209,000 919,000
Proceeds from minority interest in consolidated
partnerships....................................... -- 16,395
----------- ----------
Net cash provided by(used in) financing
activities................................... 329,155 (2,012,847)
----------- ----------
Net increase in cash.......................... 59,847 116,368
Cash at beginning of year............................. 1,464,738 1,348,370
----------- ----------
Cash at end of year................................... $ 1,524,585 1,464,738
=========== ==========

See accompanying notes to combined financial statements.

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS

March 31, 1998 and 1997

(1) Summary of Significant Accounting Policies and Practices

(a) Description of Business

SLM Group, Inc. and its subsidiaries (the Company) market and sell heavy duty
trucks and parts and also service heavy duty trucks and trailers primarily from
locations in Texas, Oregon and Mexico and, through its telemarketing
operations, throughout the United States. Avantra Corporation's revenues are
from refueling contracts with the United States Department of Defense. On March
31, 1998 the operations of Avantra Corporation ceased as its remaining
government contracts expired. Management does not anticipate any new contracts.
Avantra's operations are not significant to the Company's operations and the
contract expirations are not expected to have a material adverse effect on the
Company.

(b) Principles of Combination

The combined financial statements include the following companies:

. SLM Group, Inc.,

. PEI Properties, Inc. and majority-owned partnership,

. Avantra Corporation, and,

. SLM Power Group, Inc. and subsidiaries

SLM Power Group, Inc. is an 85.99% owned subsidiary of the Company. The
financial statements of the Company are combined because SLM Power Group, Inc.
is under common management. All other subsidiaries are wholly-owned by the
Company. The combined financial statements also include a 70% owned joint
venture, Parts Distributing Company (U.K.), Ltd. The joint venture was formed
on December 1, 1996. In addition, an approximate 53% owned ranch partnership is
also included in the combined financial statements. Minority interest is
charged for the earnings or losses attributable to the minority interest.

The foreign operations are not significant to the combined operations of the
Company.

All significant intercompany balances and transactions have been eliminated
in combination.

Parts inventory are stated at the lower of replacement cost, which
approximates the first-in, first-out method, or market. Trucks, trailers and
cores for rebuilt parts are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.

(d) Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets. Leasehold
improvements are amortized straight line over the shorter of the lease term or
estimated useful life of the asset.

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(e) Investment in Affiliated Partnership

In fiscal year 1996, the Company acquired a 21.28% general partner interest
in an affiliated partnership. This investment was accounted for using the
equity method through June 30, 1996. On July 1, 1996, the Company purchased an
additional 31.73% general partner interest in the partnership. The acquisition
resulted in the Company obtaining an approximate 53% general partner interest
in the partnership. Accordingly, the operations of the partnership after July
1, 1996 are included in the combined financial statements of the Company. The
acquisition of the these partnership interests has been accounted for at the
Company's historical cost as the entities are under common control.

(f) Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
year in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

(g) Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

(2) Inventories

Inventories consist of the following at March 31:

[Download Table]

1998 1997
----------- ---------

Parts, net of reserves for obsolescence of $38,059
in 1998 and 1997................................... $ 8,799,041 7,510,971
Trucks and trailers................................. 1,734,010 765,896
Cores for rebuilt parts............................. 659,106 674,381
----------- ---------
$11,192,157 8,951,248
=========== =========

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(3) Property and Equipment

Property and equipment consists of the following at March 31:

[Download Table]

Estimated
useful life 1998 1997
------------- ----------- ----------

Land.................................. -- $ 3,214,692 3,291,372
Buildings............................. 20 years 3,243,346 3,210,231
Equipment............................. 2 to 10 years 5,942,740 5,938,598
Livestock............................. 5-7 years 630,399 572,143
Furniture and fixtures................ 2-3 years 133,937 133,937
Leasehold improvements................ 3 years 251,749 214,996
----------- ----------
13,416,863 13,361,277
Less accumulated depreciation and amortization...... (6,573,748) (6,417,998)
----------- ----------
$ 6,843,115 6,943,279
=========== ==========

(4) Notes Payable to Bank

The Company has two revolving lines of credit ($7,000,000 for working capital
and $1,000,000 for capital expenditures) established with a bank on August 1,
1996. The interest rate on advances under this facility (8.5% at March 31,
1998) is, at the option of the Company, the bank's prime rate payable monthly,
or 2.5% above the London InterBank Offered Rate (LIBOR rate) for 30, 60, 90 or
180 days, payable on the last day of the LIBOR term selected by the Company.
The unused line of credit available to the Company, subject to certain
borrowing base obligations and reserves, was approximately $3,800,000 at March
31, 1998. The lines of credit are secured by inventory, eligible accounts
receivable and certain other assets of the Company. The loan agreement
requires, among other matters, maintenance of certain financial ratios. The
working capital line of credit has a March 31, 1998 balance of $3,000,000 and
expires August 1, 1999. The capital expenditures line of credit has a March 31,
1998 balance of zero and expires August 1, 1998.

The Company also has a $2,000,000 revolving line of credit with a bank. The
outstanding balance on the line of credit at March 31, 1998 is $1,000,000. The
interest rate on advances under this facility (8.5% at March 31, 1998) is, at
the option of the Company, the bank's prime rate which is payable monthly, or
2.5% above the London InterBank Offered Rate (LIBOR rate) for 30, 60, 90 or 180
days, payable on the last day of the LIBOR term selected by the Company. The
unused line of credit available to the Company was approximately $1,000,000 at
March 31, 1998. The line of credit is secured by new and used truck inventory.
The line of credit expires August 1, 1999.

(5) Interest-Bearing Obligations Payable Under Floorplan Arrangements and Long-
Term Debt

The Company finances a portion of their new and used truck inventory under a
blanket floorplan financing agreement with their vendor which bears interest at
the prime rate (8.5% at March 31, 1998) plus 1% for new vehicles and plus 1.5%
for used vehicles. The floorplan agreement has a March 31, 1998 balance of
$320,262 and is secured by new and used truck inventories. Interest is payable
monthly and principal payments are due when a truck is sold.

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Long-term debt consists of the following at March 31:

[Download Table]

1998 1997
---------- ---------

Notes payable to a former stockholder in quarterly
installments of $54,000 including interest at 9%; due
October 2004; secured by stock of the Company........... $1,296,000 1,512,000

Note payable to bank due in monthly installments of
$7,900 including interest at 8.1% due August 2000;
secured by real estate.................................. 619,974 661,959

Notes payable to a related party; due in monthly
installments of $5,050 and $5,099 including interest at
5.45% and 5.6% for 1998 and 1997, respectively; maturing
through March 2007, secured by real estate.............. 613,366 639,409

Note payable to bank due in monthly installments of
$7,565 including interest at 8.1%; due August 2001;
secured by real estate.................................. 558,878 601,817

Note payable to a stockholder of SLM, due in monthly
installments of $3,960 including interest at 9%; due
June 1999; secured by real estate....................... 252,384 276,020

Unsecured notes payable to a related party with interest
payable semi-annually at 6.26%; due June 2005........... 180,000 210,000

Unsecured notes payable to a related party; due in annual
installments of $16,667; interest is payable semi-
annually at 6.26%; due June 2005........................ 133,333 150,000

Note payable to individuals in monthly installments of
$2,446, including interest at 8%, due May 2001, secured
by a lien on real estate................................ 81,880 103,727

Unsecured note payable to a related party due in
quarterly installments of $2,027 including interest at
6.8%; due December 2022................................. 96,787 98,603

Unsecured notes payable to a shareholder of SLM due in
monthly installments of $6,000 including interest at 9%,
maturing through May 1999............................... 21,321 83,847

Unsecured notes payable to a stockholder due in monthly
installments of $3,000 including interest at 10.5%; due
July 2003............................................... 134,993 155,626

Unsecured notes payable to a related party due in monthly
installments of $4,500 and $5,500 in 1998 and 1997,
respectively, including interest at 9%; maturing through
July 2000............................................... 70,146 60,661

Unsecured notes payable to affiliated individuals in
monthly installments of $1,310 including interest at 9%;
maturing through December 1998.......................... 51,361 41,812

Unsecured notes payable to stockholders of SLM with
interest payable semi-annually at 6.26%; due June 2005.. 60,000 30,000

Unsecured note payable to a related party due in annual
installments of $4,000 for 1998 and annual installments
of $10,500 plus interest thereafter at 5.39%, due March
2000.................................................... 21,000 25,000

Unsecured note payable to former stockholders in semi-
annual installments of $25,000 including interest at 8%;
due August 2000......................................... 286,788 --

Note payable to bank due in monthly installments of
$14,200 including interest at 8.05%; due August 2002;
secured by trade accounts receivable and inventory...... 618,616 --

Unsecured notes payable to shareholder of SLM due in
monthly installments of $8,500 including interest at 9%;
maturing through March 2000............................. 78,095 --

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

[Download Table]

1998 1997
---------- ---------

Unsecured notes payable to affiliated individuals due at
maturity including interest at 9% and 9.25%; maturing
through March 1999..................................... $ 45,000 --

Unsecured note payable to a related party due in monthly
installments of $6,982 including interest at 9%; due
December 1997.......................................... -- 60,548
---------- ---------
Total long-term debt.................................. 5,219,922 4,711,029
Less current installments of long-term debt........... (796,025) (642,318)
---------- ---------
Long-term debt, excluding current installments........ $4,423,897 4,068,711
========== =========

The aggregate maturities of long-term debt are as follows:

[Download Table]

Year ending March 31:
1999............................................................ $ 796,025
2000............................................................ 872,529
2001............................................................ 1,284,177
2002............................................................ 919,409
2003............................................................ 291,822
Thereafter...................................................... 1,055,960
----------
$5,219,922
==========

The Company paid $692,963 and $799,359 for interest for the years ended March
31, 1998 and 1997, respectively.

(6) Income Taxes

Income tax (expense) benefit for the years ended March 31 consist of the
following:

[Download Table]

Current Deferred Total
----------- -------- ----------

Year ended March 31, 1998:
U.S. federal............................... $(1,325,917) 63,000 (1,262,917)
State...................................... (81,000) 6,000 (75,000)
----------- ------- ----------
$(1,406,917) 69,000 (1,337,917)
=========== ======= ==========
Year ended March 31, 1997:
U.S. federal............................... $ (864,000) 141,000 (723,000)
State...................................... (45,000) 12,000 (33,000)
----------- ------- ----------
$ (909,000) 153,000 (756,000)
=========== ======= ==========

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Income tax expense was $1,337,917 and $756,000 for the years ended March 31,
1998 and 1997, respectively, and differed from the amounts computed by applying
the U.S. federal income tax rate of 34 percent to income before income taxes
and minority interest as a result of the following:

[Download Table]

1998 1997
----------- --------

Computed "expected" tax
expense.................. $(1,244,483) (794,618)
(Increase) decrease in
income taxes resulting
from:
State income taxes, net
of federal income tax
benefit................ (53,460) (29,700)
Non-deductible loss of
foreign subsidiary..... 19,907 17,600
Non-deductible portion
of loss from affiliated
entity................. (25,236) (47,940)
Non-deductible key man
life insurance
premiums............... (35,931) (31,358)
Cash surrender value of
life insurance
policies............... 39,004 66,673
Prior year tax
adjustments............ 4,083 79,607
Other, net.............. (41,801) (16,264)
----------- --------
$(1,337,917) (756,000)
=========== ========

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities at March 31 are
presented below:

[Download Table]

1998 1997
-------- --------

Deferred tax assets:
Accounts receivable, principally due to allowance for
doubtful accounts....................................... $ 21,000 21,000
Inventories, principally due to reserve for
obsolescence............................................ 14,000 14,000
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax Reform
Act of 1986............................................. 80,000 55,000
Employee benefits, principally due to accrual for
financial reporting purposes............................ 45,000 44,000
Property and equipment, principally due to differences in
depreciation............................................ 170,000 136,000
-------- --------
Total gross deferred tax assets........................ 330,000 270,000
Deferred tax liabilities--prepaid expenses................. (98,000) (107,000)
-------- --------
Net deferred tax asset................................. $232,000 163,000
======== ========

In assessing the realizability of net deferred tax asset, management
considers whether it is more likely than not that some portion or all of the
deferred tax asset will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences are deductible. Management
considers projected future taxable income and tax planning strategies in making
this assessment. Based upon the level of historical taxable income projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences at March 31, 1998.

The Company paid $1,250,000 and $930,000 for income taxes for the years ended
March 31, 1998 and 1997, respectively.

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SLM GROUP, INC. AND SUBSIDIARIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

(7) Leases

The Company has several noncancelable operating leases, primarily for office
and warehouse space, that expire over the next five years. Future minimum lease
payments under these leases as of March 31, 1998 are:

[Download Table]

Year ending March 31:
1999............................................................ $ 679,474
2000............................................................ 539,486
2001............................................................ 373,717
2002............................................................ 333,274
2003............................................................ 346,607
----------
$2,272,558
==========

Rental expense for operating leases was approximately $687,000 and $436,000
for the years ended March 31, 1998 and 1997, respectively.

The Company paid $63,000 to an entity owned by stockholders of the Company
for equipment leases for each of the years ended March 31, 1998 and 1997,
respectively.

(8) Flood Loss

On January 1, 1997, the Company's Sparks, Nevada facility was affected by a
flood that encompassed the Reno/Sparks metropolitan area. The losses were
limited primarily to inventory, supplies and equipment. The facility was closed
for thirty days, and the operations were temporarily shifted to the Carrollton,
Texas facility during the clean-up and restart phase.

(9) Year 2000 (unaudited)

Management has initiated an company-wide program to prepare the Company's
computer systems and applications for the year 2000. The Company expects to
incur internal staff costs related to infrastructure and facilities
enhancements necessary to prepare the systems for the year 2000. Management
does not anticipate testing and conversion of system applications to have a
material financial effect upon the Company as a whole, as a significant
proportion of these costs are not likely to be incremental costs to the
Company, but rather will represent the redeployment of existing information
technology resources.

(10) Subsequent Events (unaudited)

Subsequent to March 31, 1998, the Company was sold to Quality Distribution
Service Partners, Inc. As part of this transaction, PEI Properties, Inc. was
sold to the stockholders of SLM Group, Inc. and Avantra Corporation was
dissolved.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Wheatley Truck Parts, Inc.

We have audited the accompanying balance sheets of Wheatley Truck Parts, Inc.
as of November 30, 1997 and July 31, 1998, and the statements of income and
retained earnings and cash flows for the years ended November 30, 1996 and
1997, and the period from December 1, 1997 to July 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wheatley Truck Parts, Inc. as
of November 30, 1997 and July 31, 1998, and the results of its operations and
its cash flows for the years ended November 30, 1996 and 1997, and the period
from December 1, 1997 to July 31, 1998, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
August 27, 1999

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WHEATLEY TRUCK PARTS, INC.

BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

[Download Table]

November 30 July 31
1997 1998
----------- -------
ASSETS
------

Current assets:
Cash...................................................... $ 39 $ 249
Accounts receivable, net of allowance for doubtful
accounts of $25.......................................... 813 876
Inventories............................................... 1,608 1,624
Deferred income taxes..................................... 222 222
Other current assets...................................... 7 5
------ ------
Total current assets.................................... 2,689 2,976
Property and equipment, net............................... 212 214
------ ------
Total assets............................................ $2,901 $3,190
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Revolving line of credit.................................. $ 96 $ 218
Current portion of long-term debt......................... 32 25
Accounts payable.......................................... 758 642
Accrued expenses.......................................... 39 59
Income taxes payable...................................... 44 68
------ ------
Total current liabilities............................... 969 1,012
Long-term debt, less current portion........................ 9 20
Stockholders' equity:
Common stock, no par value, 1,000 shares authorized, 1,000
shares issued and outstanding 62 62
Retained earnings......................................... 1,861 2,096
------ ------
Total stockholders' equity.............................. 1,923 2,158
------ ------
Total liabilities and stockholders' equity.............. $2,901 $3,190
====== ======

See accompanying notes to financial statements.

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WHEATLEY TRUCK PARTS, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in Thousands)

[Download Table]

Period from
Year ended December 1,
November 30, 1997 to
-------------- July 31,
1996 1997 1998
------ ------ -----------

Net sales.......................................... $9,278 $9,501 $6,670
Cost of goods sold................................. 5,893 6,128 4,251
------ ------ ------
Gross profit....................................... 3,385 3,373 2,419
Selling, general, and administrative expenses...... 2,992 2,992 2,033
------ ------ ------
Operating income................................... 393 381 386
Interest expense................................... (22) (16) (7)
Other income....................................... 3 9 8
------ ------ ------
Income before income taxes......................... 374 374 387
Income taxes....................................... 148 148 152
------ ------ ------
Net income......................................... 226 226 235
Retained earnings at beginning of period........... 1,409 1,635 1,861
------ ------ ------
Retained earnings at end of period................. $1,635 $1,861 $2,096
====== ====== ======

See accompanying notes to financial statements.

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WHEATLEY TRUCK PARTS, INC.

STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

[Download Table]

Period from
Year ended December 1,
November 30, 1997 to
------------ July 31,
1996 1997 1998
----- ----- -----------

Operating activities
Net income.......................................... $ 226 $ 226 $235
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization..................... 113 88 29
(Gain) loss on sale of equipment.................. 4 1 (5)
Changes in operating assets and liabilities:
Accounts receivable............................. 43 (61) (63)
Inventories..................................... (125) (117) (16)
Other assets.................................... 9 1 2
Accounts payable and accrued expenses (3) (63) (96)
Income taxes payable............................ 65 (62) 24
----- ----- ----
Net cash provided by operating activities........... 332 13 110
Investing activities
Capital expenditures................................ (88) (54) (32)
Proceeds from sale of equipment..................... 18 -- 6
----- ----- ----
Net cash used in investing activities............... (70) (54) (26)
Financing activities
Net borrowings (payments) on revolving line of
credit............................................. (237) 86 122
Borrowings of long-term debt........................ 63 -- 32
Payments on long-term debt.......................... (64) (49) (28)
----- ----- ----
Net cash (used in) provided by financing
activities......................................... (238) 37 126
----- ----- ----
Net increase (decrease) in cash..................... 24 (4) 210
Cash at beginning of period......................... 19 43 39
----- ----- ----
Cash at end of period............................... $ 43 $ 39 $249
===== ===== ====

See accompanying notes to financial statements.

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WHEATLEY TRUCK PARTS, INC.

NOTES TO FINANCIAL STATEMENTS
Years ended November 30, 1996 and 1997
and period from December 1, 1997 to July 31, 1998
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

Wheatley Truck Parts, Inc. (the Company) distributes heavy-duty replacement
parts for heavy-duty vehicles primarily throughout the Midwest region of the
United States. The Company's principal products include truck and trailer
brakes, suspensions, drivelines, hydraulic parts, and other replacement parts.
The Company's customers include independent distributors, general repair shops,
independent trucking businesses, major fleets, and other operators of heavy-
duty equipment.

Effective July 31, 1998, the Company was sold to Quality Distribution Service
Partners, Inc.

2. Summary of Significant Accounting Policies

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
finished goods.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using accelerated tax methods over the respective
estimated useful lives of the assets for financial reporting purposes as
follows: 5 to 20 years for machinery and equipment, 5 to 10 years for furniture
and fixtures, 5 years for vehicles, and 5 to 30 years for leasehold
improvements. Leasehold improvements are stated at cost and amortized over the
shorter of the lease term or the useful life of improvements. Depreciation and
amortization was $113, $88, and $29 for the years ended November 30, 1996 and
1997 and the period ended July 31, 1998, respectively.

Income Taxes

Deferred income taxes are recognized for the tax consequences of the
differences between the financial statement carrying amounts and the tax bases
of the existing assets and liabilities by applying the enacted statutory income
tax rates applicable to the periods when such differences are expected to
reverse. Deferred taxes are recognized for the timing of these differences for
financial reporting and income tax reporting purposes.

Revenue Recognition

Revenue is recognized when products are shipped.

Long-Lived Assets

The Company evaluates its long-lived assets on an ongoing basis. Such assets
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the related asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of the asset to future undiscounted cash flows expected to be
generated by the asset. If the asset is determined to be impaired, the
impairment recognized is measured by the amount by which the carrying value of
the asset exceeds its fair value.

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WHEATLEY TRUCK PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheets for cash,
accounts receivable, other current assets, accounts payable, and accrued
expenses approximate their fair value because of the short-term maturity of
these instruments.

The Company estimates the fair value of the fixed rate long-term debt
obligations, including current portions, using the discounted cash flow method
with interest rates currently available for similar obligations. The carrying
amounts reported in the Company's balance sheets for these obligations
approximate fair value.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
To minimize this risk, ongoing credit evaluations of customers' financial
condition are performed, although collateral is not required.

Use of Estimates

3. Property and Equipment

Property and equipment are summarized as follows:

[Download Table]

November 30 July 31
1997 1998
----------- -------

Machinery and equipment.................................. $ 519 $ 519
Furniture and fixtures................................... 311 311
Vehicles................................................. 345 353
Leasehold improvements................................... 112 112
------ ------
1,287 1,295
Less: Accumulated depreciation and amortization 1,075 1,081
------ ------
$ 212 $ 214
====== ======

4. Revolving Line of Credit

The Company maintains a revolving line of credit (Revolver) providing for
borrowings of up to $600 for working capital purposes. The Revolver bears
interest payable monthly at the bank's prime rate (8.5% at July 31, 1998).
Amounts advanced are due on April 1999 subject to certain lending restrictions
and collateralized by substantially all assets of the Company. At July 31,
1998, the Company had an unused portion of the Revolver of $382.

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WHEATLEY TRUCK PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

5. Long-Term Debt

Long-term debt are summarized as follows:

[Download Table]

November 30 July 31
1997 1998
----------- -------

Notes payable.......................................... $41 $45
Less: Current maturities............................... 32 25
--- ---
$ 9 $20
=== ===

The Company entered into several notes payable (Notes) for vehicles. The
Notes are payable in monthly installments, bear interest ranging from 7.5% to
9.0%, and mature at various dates through February 2001.

Annual maturities of long-term debt are as follows for the years ending July
31:

[Download Table]

1999................................................................... $25
2000................................................................... 11
2001................................................................... 9
---
$45
===

6. Operating Leases

The Company leases buildings under operating leases from certain stockholders
of the Company. The leases expire at various dates through 2001. Rent under the
operating leases to these related parties was $176 for the years ended November
1996 and 1997, respectively, and $118 for the period ended July 31, 1998.

Additionally, the Company leases buildings and equipment under operating
leases from unaffiliated entities. The leases expire on various dates through
2001. Rent expense for such leases was $44, $41, and $29 for the years ended
November 30, 1996 and 1997 and period ended July 31, 1998, respectively.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows for the years ending July 31:

[Download Table]

1999.................................................................. $ 82
2000.................................................................. 97
2001.................................................................. 28
----
$207
====

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WHEATLEY TRUCK PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Income Taxes

Income taxes included in the statement of income consist of the following:

[Download Table]

Period from
Year ended December 1,
November 30, 1997 to
------------ July 31,
1996 1997 1998
---- ----- -----------

Current:
Federal............................................ $127 $127 $132
State.............................................. 21 21 20
---- ---- ----
$148 $148 $152
==== ==== ====

Reconciliation of effective income tax rate computed at the U.S. federal
statutory tax rate to income tax expense is as follows:

[Download Table]

Period from
Year ended December 1,
November 30, 1997 to
-------------- July 31,
1996 1997 1998
------ ------ -----------

Income taxes at U.S. federal statutory rate.. 34.0% 34.0% 34.0%
State income taxes, net of federal tax
benefit..................................... 4.7 4.7 4.7
Other........................................ 0.8 0.8 0.6
------ ------ ----
Income tax benefit........................... 39.5% 39.5% 39.3%
====== ====== ====

Significant components of the Company's deferred income are as follows:

[Download Table]

November 30 July 31
1997 1998
----------- -------

Deferred tax assets:
Allowance for doubtful accounts...................... $ 10 $ 10
Inventory obsolescence reserve....................... 212 212
---- ----
Net deferred tax assets................................ $222 $222
==== ====

8. Related Party Transactions

The Company leases buildings from certain stockholders of the Company as
described in Note 6.

9. Employee Savings Plan

The Company sponsors a defined-contribution, profit-sharing plan to provide
substantially all employees of the Company an opportunity to accumulate
personal funds for their retirement subject to minimum duration of employment
requirements. Participating employees may contribute up to 15% of before-tax
earnings to the plan, and the Company matches up to 2% of the employees'
contributions to the plan. Company matching contributions to the plan were $19,
$20, and $15 for the years ended November 30, 1996 and 1997 and the period
ended July 31, 1998, respectively.

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WHEATLEY TRUCK PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

10. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the statement of cash flows:

[Download Table]

Period from
Year ended December 1,
November 30, 1997 to
------------- July 31,
1996 1997 1998
------ ------ -----------

Cash paid for:
Interest......................................... $ 20 $ 16 $ 7
Income taxes..................................... 56 122 128

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Truck City Parts, Inc.

We have audited the accompanying balance sheets of Truck City Parts, Inc. as
of December 31, 1997 and July 31, 1998, and the statements of income,
stockholder's equity, and cash flows for the year ended December 31, 1997 and
period from January 1, 1998 to July 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Truck City Parts, Inc. at
December 31, 1997 and July 31, 1998, and the results of its operations and its
cash flows for the year ended December 31, 1997 and period from January 1, 1998
to July 31, 1998, in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
December 18, 1998

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TRUCK CITY PARTS, INC.

BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

[Download Table]

December 31, July 31,
1997 1998
------------ --------
ASSETS
------

Current assets:
Accounts receivable, net of allowance for doubtful
accounts of $70....................................... $1,260 $1,356
Inventories............................................ 2,523 2,017
Deferred income taxes.................................. 278 273
Other current assets................................... 131 39
------ ------
Total current assets................................. 4,192 3,685
Property, plant, and equipment, net.................... 911 937
------ ------
Total assets......................................... $5,103 $4,622
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Accounts payable....................................... $1,047 $ 973
Accrued expenses....................................... 182 386
Due to stockholders.................................... 277 140
Current portion of long-term debt...................... 1,228 477
------ ------
Total current liabilities............................ 2,734 1,976
Long-term debt, less current portion..................... 869 767
Deferred income taxes.................................... 59 55
Stockholders' equity:
Common stock, $10 par value, 5,000 shares authorized,
1,000 shares
issued and outstanding................................ 10 10
Additional paid-in capital............................. 318 318
Retained earnings...................................... 1,142 1,525
Cost of 39 shares of common stock in treasury.......... (29) (29)
------ ------
Total stockholders' equity........................... 1,441 1,824
------ ------
Total liabilities and stockholders' equity........... $5,103 $4,622
====== ======

See accompanying notes to financial statements.

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TRUCK CITY PARTS, INC.

STATEMENTS OF INCOME
(Dollars in Thousands)

[Download Table]

Period from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ -----------

Net sales.............................................. $13,539 $8,411
Cost of goods sold..................................... 9,208 5,520
------- ------
Gross profit........................................... 4,331 2,891
Selling, general, and administrative expenses.......... 3,817 2,185
------- ------
Operating income....................................... 514 706
Interest expense....................................... (210) (100)
Interest income........................................ 48 18
------- ------
Income before income taxes............................. 352 624
Income taxes........................................... 141 241
------- ------
Net income............................................. $ 211 $ 383
======= ======

See accompanying notes to financial statements.

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TRUCK CITY PARTS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1997 and
period from January 1, 1998 to July 31, 1998
(Dollars in Thousands)

[Download Table]

Cost of
Additional Common Total
Common Paid-In Retained Stock in Stockholders'
Stock Capital Earnings Treasury Equity
------ ---------- -------- -------- -------------

Balance at January 1, 1997.. $10 $318 $ 931 $ -- $1,259
Purchase of common stock for
treasury................... -- -- -- (29) (29)
Net income.................. -- -- 211 -- 211
--- ---- ------ ---- ------
Balance at December 31,
1997....................... 10 318 1,142 (29) 1,441
Net income.................. -- -- 383 -- 383
--- ---- ------ ---- ------
Balance at July 31, 1998.... $10 $318 $1,525 $(29) $1,824
=== ==== ====== ==== ======

See accompanying notes to financial statements.

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TRUCK CITY PARTS, INC.

STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

[Download Table]

Period from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ -----------

Operating activities
Net income............................................ $ 211 $ 383
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 209 126
Deferred income taxes............................... 25 1
Gain on sale of property, plant, and equipment...... (4) (1)
Changes in operating assets and liabilities:
Accounts receivable................................ 109 (96)
Inventories........................................ (344) 506
Other current assets............................... (111) 92
Accounts payable and accrued expenses.............. (297) 130
----- -------
Net cash provided by (used in) operating
activities....................................... (202) 1,141
Investing activities
Capital expenditures.................................. (93) (111)
Proceeds from sale of property, plant, and equipment.. 9 118
----- -------
Net cash provided by (used in) investing
activities....................................... (84) 7
Financing activities
Proceeds (payments) on amounts due to stockholders.... 12 (137)
Proceeds from issuance of long-term debt.............. 764 330
Payments on long-term debt............................ (476) (1,341)
Purchase of treasury stock............................ (14) --
----- -------
Net cash provided by (used in) financing activities... 286 (1,148)
----- -------
Net change in cash.................................... -- --
Cash at beginning of period........................... -- --
----- -------
Cash at end of period................................. $ -- $ --
===== =======

See accompanying notes to financial statements.

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TRUCK CITY PARTS, INC.
NOTES TO FINANCIAL STATEMENTS
Year ended December 31, 1997 and
period from January 1, 1998 to July 31, 1998
(Dollars in Thousands)

1. Description of Business

Truck City Parts, Inc. (the Company) distributes heavy duty truck parts to
retail and wholesale customers, mainly in the coal, timber, and trucking
industries. The Company's products such as brakes, suspensions, filters, and
other replacement parts, are sold primarily throughout the mid-Atlantic region
of the United States.

Effective July 31, 1998, the Company was sold to Quality Distribution Service
Partners, Inc.

2. Summary of Significant Accounting Policies

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the last in, first out (LIFO) method.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated
depreciation. Depreciation is provided using the straight-line method over the
respective estimated useful lives of the assets for financial reporting
purposes as follows: 5 to 20 years for machinery and equipment, 5 to 10 years
for furniture and fixtures, 5 years for vehicles, 5 to 30 years for leasehold
improvements, and 20 years for land improvements. Accelerated depreciation
methods are used for income tax purposes. Leasehold improvements are stated at
cost and amortized over the shorter of the lease term or the useful life of
improvements. Depreciation and amortization was $176 and $126 for the year
ended December 31, 1997 and period ended July 31, 1998, respectively.

Income Taxes

Revenue Recognition

Revenue is recognized when products are shipped.

Long-Lived Assets

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TRUCK CITY PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

comparison of the carrying amount of the asset to future undiscounted cash
flows expected to be generated by the asset. If the asset is determined to be
impaired, the impairment recognized is measured by the amount by which the
carrying value of the asset exceeds its fair value.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for accounts
receivable, other current assets, accounts payable, and accrued expenses
approximate their fair value because of the short-term maturity of these
instruments.

The carrying amounts reported in the Company's balance sheets for variable
rate long-term debt, including current portion, approximate fair value, as the
underlying long-term debt instrument is comprised of a note that is repriced on
a short-term basis.

The Company estimates the fair value of the fixed rate long-term debt
obligations including current portions, using the discounted cash flow method
with interest rates currently available for similar obligations. The carrying
amounts reported in the Company's balance sheets for these obligations
approximate fair value.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable.
To minimize this risk, ongoing credit evaluations of customers' financial
condition are performed, although collateral is not required.

Use of Estimates

3. Inventories

Inventories are summarized as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ ---------

Parts, including core inventories..................... $ 317 $ 375
Finished goods........................................ 2,206 1,642
------ ------
$2,523 $2,017
====== ======

If the first in, first out method (FIFO) had been used for valuing
inventories, the total amount of income before income taxes would have
increased by $73 and $84 for the year ended December 31, 1997 and period ended
July 31, 1998, respectively.

F-225

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TRUCK CITY PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Property, Plant, and Equipment

Property, plant, and equipment are summarized as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Land and land improvements............................. $ 21 $ 3
Machinery and equipment................................ 574 528
Furniture and fixtures................................. 142 189
Vehicles............................................... 662 639
Leasehold improvements................................. 282 278
------ ------
1,681 1,637
Less: Accumulated depreciation......................... 770 700
------ ------
$ 911 $ 937
====== ======

5. Long-Term Debt

Long-term debts are summarized as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Revolving line of credit............................... $ 950 $ 150
Term loan.............................................. 1,040 870
Installment notes...................................... 107 224
------ ------
2,097 1,244
Less: Current maturities............................... 1,228 477
------ ------
$ 869 $ 767
====== ======

On March 28, 1997, the Company entered into a credit agreement providing for
a $1,200 revolving line of credit (the Revolver) available to the Company for
working capital purposes. Advances may be made under the Revolver up to an
aggregate of $1,200, subject to certain lending restrictions. The Revolver
matures on April 1, 2002, and bears interest at the banks' prime rate (8.5% at
July 31, 1998) plus 0.5%. Interest is due on the first day of each month, and
the interest rate was approximately 9.0% at July 31, 1998. At July 31, 1998,
the Company had no outstanding letters of credit and an unused portion of the
Revolver of $1,050.

On March 28, 1997, the Company entered into a credit agreement providing for
a $1,200 term loan (Term Loan) to refinance existing bank term loans. The Term
Loan is payable in monthly principal installments of $20 and bears interest
payable monthly at the bank's prime rate plus 0.5% through April 1, 2002.

The Revolver and Term Loan are collateralized by substantially all assets of
the Company and guaranteed by a stockholder of the Company. In addition, the
Revolver and Term Loan require the Company to comply with certain nonfinancial
covenants.

Installment notes for vehicles mature through 2001, are payable in monthly
principal and interest installments, bear interest at 3.0%, and are
collateralized by vehicles.

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TRUCK CITY PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Annual maturities of long-term debt are as follows at July 31, 1998:

[Download Table]

1999............................................................. $ 477
2000............................................................. 324
2001............................................................. 293
2002............................................................. 150
------
$1,244
======

6. Operating Leases

The Company leases buildings and an airplane under operating leases from a
stockholder of the Company. The leases expire at various dates through 2003.
Rent under the operating leases to this related party was $250 and $146 for the
year ended December 31, 1997 and the period ended July 31, 1998, respectively.

Additionally, the Company leases buildings under noncancelable operating
leases from unaffiliated entities. The leases expire on various dates through
2003. Rent expense for such leases was $78 and $75 for the year ended December
31, 1997 and the period ended July 31, 1998, respectively.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows at July 31, 1998:

[Download Table]

1999............................................................. $ 311
2000............................................................. 307
2001............................................................. 216
2002............................................................. 180
2003............................................................. 105
------
$1,119
======

7. Income Taxes

Income taxes included in the statement of income consist of the following:

[Download Table]

Period from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ -----------

Current:
Federal........................................ $102 $212
State.......................................... 14 28
---- ----
116 240
Deferred......................................... 25 1
---- ----
$141 $241
==== ====

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TRUCK CITY PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Reconciliation of effective income tax rate computed at the U.S. federal
statutory tax rate to income tax expense is as follows:

[Download Table]

Period from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ -----------

Income taxes at U.S. federal statutory rate...... 34.0% 34.0%
State income taxes, net of federal tax benefit... 4.6 4.6
Other............................................ 1.4 0.2
---- ----
Income tax expense............................... 40.0% 38.8%
==== ====

Significant components of the Company's deferred income taxes are as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Deferred tax assets:
Allowance for doubtful accounts................... $ 27 $ 27
Inventory obsolescence reserve.................... 232 232
Other............................................. 19 14
---- ----
278 273
Deferred tax liability:
Accelerated depreciation.......................... (59) (55)
---- ----
Net deferred tax asset.............................. $219 $218
==== ====

8. Related Party Transactions

The Company has a note payable due to a stockholder of the Company, bearing
interest at 9.0% and due on demand. The balance outstanding was $140 at July
31, 1998.

The Company also made payments of $137 for a note payable due to a
stockholder of the Company during the period ended July 31, 1998. No balance
remained outstanding at July 31, 1998.

In addition, the Company leases buildings and an airplane from a stockholder
of the Company as described in Note 6.

9. Employee Savings Plan

The Company sponsors a contributory savings plan to provide substantially all
employees of the Company an opportunity to accumulate personal funds for their
retirement subject to minimum duration of employment requirements.
Participating employees may contribute up to 10% of before-tax earnings to the
plan, which are matched up to 2%. Company matching contributions to the plan
were $15 and $10 for the year ended December 31, 1997 and period ended July 31,
1998, respectively.

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TRUCK CITY PARTS, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

10. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the statements of cash flows:

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
1997 July 31, 1998
------------ -------------

Cash paid for:
Interest..................................... $210 $100
Income taxes................................. 306 47

The Company issued $164 and $158 in notes payable for the year ended December
31, 1997 and period ended July 31, 1998, respectively, to purchase machinery
and equipment. The Company issued $15 in notes payable for the year ended
December 31, 1997 to purchase treasury stock.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Automotive Sales Company, Inc.

We have audited the accompanying balance sheets of Automotive Sales Company,
Inc. (the Company) as of December 31, 1997 and July 31, 1998 and, the
statements of income and retained earnings and cash flows for the years ended
December 31, 1996 and 1997 and period from January 1, 1998 to July 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Automotive Sales Company, Inc.
as of December 31, 1997 and July 31, 1998, and the results of its operations
and its cash flows for the years ended December 31, 1996 and 1997 and period
from January 1, 1998 to July 31, 1998, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
August 27, 1999

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AUTOMOTIVE SALES COMPANY, INC.

BALANCE SHEETS
(dollars in thousands, except share data)

[Download Table]

July
December 31, 31,
1997 1998
------------ ------
ASSETS
------

Current assets:
Cash and cash equivalents................................ $ 20 $ 18
Accounts receivable, net of allowance for doubtful
accounts of $5.......................................... 829 1,092
Inventories.............................................. 1,464 1,301
Current portion of rebates receivable.................... 134 73
Other current assets..................................... 109 107
------ ------
Total current assets................................... 2,556 2,591
Property, plant, and equipment, net...................... 1,598 1,607
Rebates receivable, less current portion................. 257 330
Other assets............................................. 104 112
------ ------
Total assets........................................... $4,515 $4,640
====== ======

LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------

Current liabilities:
Revolving line of credit................................. $ 25 $ 80
Current portion of long-term debt........................ 189 200
Accounts payable......................................... 1,260 1,086
Accrued expenses......................................... 271 286
------ ------
Total current liabilities.............................. 1,745 1,652
Long-term debt, less current portion....................... 2,031 1,915
Stockholder's equity:
Common stock, $1 par value; 100,000 shares authorized;
50,000 shares issued and outstanding.................... 50 50
Retained earnings........................................ 689 1,023
------ ------
Total stockholder's equity............................. 739 1,073
------ ------
Total liabilities and stockholder's equity............. $4,515 $4,640
====== ======

See accompanying notes to financial statements.

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AUTOMOTIVE SALES COMPANY, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
(dollars in thousands)

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
---------------- July 31,
1996 1997 1998
------- ------- -----------

Net sales........................................ $12,008 $11,784 $7,108
Cost of goods sold............................... 8,302 8,235 5,251
------- ------- ------
Gross profit..................................... 3,706 3,549 1,857
Selling, general, and administrative expenses.... 3,388 3,242 1,290
------- ------- ------
Operating income................................. 318 307 567
Interest expense................................. (208) (207) (105)
Other income..................................... 64 60 15
------- ------- ------
Net income....................................... 174 160 477
Retained earnings at beginning of period......... 689 687 689
Distributions.................................... (176) (158) (143)
------- ------- ------
Retained earnings at end of period............... $ 687 $ 689 $1,023
======= ======= ======

See accompanying notes to financial statements.

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AUTOMOTIVE SALES COMPANY, INC.

STATEMENTS OF CASH FLOWS
(dollars in thousands)

[Download Table]

Year ended Period from
December January 1,
31, 1998 to
------------ July 31,
1996 1997 1998
----- ----- -----------

Operating activities:
Net income......................................... $ 174 $ 160 $ 477
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization.................... 84 80 44
Changes in operating assets and liabilities:
Accounts receivable.............................. (24) 35 (263)
Inventories...................................... (38) 193 163
Other assets..................................... (49) (74) (18)
Accounts payable and accrued expenses............ 242 (476) (159)
----- ----- -----
Net cash provided by (used in) operating
activities.................................... 389 (82) 244
Investing activities:
Capital expenditures............................... (21) (29) (53)
----- ----- -----
Net cash used in investing activities.......... (21) (29) (53)
Financing activities:
Net borrowings (payments) on revolving credit
facility.......................................... 105 (295) 55
Borrowings of long-term debt....................... -- 750 --
Payments on long-term debt......................... (294) (183) (105)
Distributions...................................... (176) (158) (143)
----- ----- -----
Net cash provided by (used in) financing
activities.................................... (365) 114 (193)
----- ----- -----
Increase (decrease) in cash and cash equivalents..... 3 3 (2)
Cash and cash equivalents at beginning of period..... 14 17 20
----- ----- -----
Cash and cash equivalents at end of period........... $ 17 $ 20 $ 18
===== ===== =====
Supplemental disclosure of cash flow information:
Cash paid for interest............................. $ 208 $ 199 $ 93

See accompanying notes to financial statements.

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AUTOMOTIVE SALES COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1997 and 1996 and
period from January 1, 1998 to July 31, 1998
(Dollars in Thousands)

1. Description of Business

Automotive Sales Company, Inc. (the Company) distributes heavy duty truck
parts to retail and wholesale customers and provides related repair services.
Products and services are sold primarily to Arizona-based customers.

Effective July 31, 1998, the Company was sold to Quality Distribution Service
Partners, Inc.

2. Summary of Significant Accounting Policies

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
finished goods.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
respective estimated useful lives of the assets for financial reporting
purposes as follows: 5 to 20 years for machinery and equipment, 5 to 10 years
for furniture and fixtures, 5 years for vehicles, 5 to 30 years for leasehold
improvements, and 20 years for land improvements. Leasehold improvements are
stated at cost and amortized over the shorter of the lease term or the useful
life of improvements. Depreciation and amortization was $84, $80, and $44 for
the years ended December 31, 1996 and 1997, and period ended July 31, 1998,
respectively.

Income Taxes

The Company has elected to be taxed as an S Corporation under the provisions
of the Internal Revenue Code and similar Arizona statutes. Under these
provisions, the Company does not pay federal or state income taxes at the
corporate level. Instead, the shareholders are liable for individual income
taxes on the Company's taxable income.

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Long-Lived Assets

The Company evaluates its long-lived assets on an ongoing basis. Such assets
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the

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AUTOMOTIVE SALES COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)

related asset may be impaired. Whether assets to be held and used are impaired
is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset. If the asset is
determined to be impaired, the loss recognized is measured by the amount by
which the carrying value of the asset exceeds its fair value.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash and
cash equivalents, trade accounts receivable, rebates receivable, other current
assets, accounts payable, and accrued expenses approximate their fair value
because of the short-term maturity of these instruments.

The carrying amount of the Company's long-term variable rate debt
approximates its fair value. The fair value of the fixed rate long-term debt
obligations is estimated using the discounted cash flow method with interest
rates currently available for similar obligations.

Concentration of Credit Risk

Use of Estimates

3. Property, Plant, and Equipment

Property, plant, and equipment are summarized as follows:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Land.................................................. $ 252 $ 252
Buildings and leasehold improvements.................. 1,404 1,404
Machinery and equipment............................... 636 544
Furniture and fixtures................................ 380 479
Vehicles.............................................. 8 47
------ ------
2,680 2,726
Less: Accumulated depreciation........................ 1,082 1,119
------ ------
$1,598 $1,607
====== ======

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AUTOMOTIVE SALES COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)

4. Rebates Receivable

The Company holds non-interest-bearing certificates of indebtedness from HD
America, Inc., a purchasing cooperative from whom the Company purchases
approximately 30%-35% of their parts. The Company is eligible for various
discounts and rebates in the form of patronage dividends on its purchases from
the cooperative. Patronage dividends are earned annually and received in the
following year in the form of cash and a nonnegotiable, non-interest-bearing
certificate of indebtedness. The Company posted an irrevocable standby letter
of credit for the benefit of HD America, Inc. in the amount of $128 expiring
December 1998. The Company has the ability to replace this group of suppliers,
but it may not be at such favorable terms.

Annual maturities of the Company's rebate receivables are as follows for the
years ending July 31:

[Download Table]

1999................................................................ $ 73
2000................................................................ 123
2001................................................................ 134
2002................................................................ 73
----
$403
====

5. Long-Term Debt

Long-term debt is summarized as follows:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Revolving credit facility............................... $ 25 $ 80
Term loan............................................... 677 604
Mortgage notes.......................................... 1,374 1,355
Note payable............................................ 147 136
Other................................................... 22 20
------ ------
2,245 2,195
Less: Current maturities................................ 214 280
------ ------
$2,031 $1,915
====== ======

The Company maintains a revolving credit facility (the Facility) with the
bank providing for borrowings of up to $650, subject to certain lending
restrictions, and bearing interest at the bank's prime rate (8.5% at July 31,
1998). The Facility matures in May 1999 and funds borrowed may not exceed 80.0%
and 50.0% of the Company's eligible accounts receivable and eligible
inventories, respectively. Available borrowings under the Facility were $401 at
July 31, 1998.

In April 1997, the Company entered into a credit agreement providing for a
$750 term loan (Term Loan) to refinance existing term loans. The Term Loan is
payable in monthly installments of $10, plus interest at the prime rate through
May 2003.

The Facility and Term Loan require the Company to comply with certain
financial and nonfinancial covenants. The Company was in compliance with such
covenants at July 31, 1998. The Facility and Term Loan are collateralized by
substantially all of the assets of the Company.

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AUTOMOTIVE SALES COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)

In December 1997, the Company entered into a mortgage note payable for $1,200
to purchase property. The mortgage note payable is due in monthly principal and
interest installments of $8 through December 2002, and bears interest at 7.0%.
The note is secured by land and building and a $400 personal guarantee by the
majority stockholder. Additionally, the Company has a mortgage note payable due
in monthly installments of $3 through March 2006, including principal and
interest at a rate adjusted every three years to the 3-year U.S. Treasury note
rate plus 3.0% (9.25% at July 31, 1998), and is secured by land and building.

The Company has a note payable due in monthly installments of $2 including
principal and interest at 6.0% through February 2004 and is secured by
inventory.

Annual maturities of the Company's long-term debt are as follows for the
years ending July 31:

[Download Table]

1999.............................................................. $ 280
2000.............................................................. 185
2001.............................................................. 190
2002.............................................................. 194
2003.............................................................. 179
2004 and thereafter............................................... 1,167
------
$2,195
======

6. Operating Leases

The Company leases vehicles under noncancelable operating leases which expire
on various dates through 2000. Rent expense approximated $158, $153, and $74
for the years ended December 31, 1996 and 1997 and period ended July 31, 1998,
respectively. Future minimum lease payments under operating leases with terms
in excess of one year are as follows for the years ending July 31:

[Download Table]

1999................................................................. $44
2000................................................................. 22
---
$66
===

7. Employee Savings Plan

The Company sponsors a profit-sharing plan with an employee contribution
provision to provide substantially all employees of the Company an opportunity
to accumulate personal funds for their retirement, subject to minimum duration
of employment requirements. Employees may contribute up to 10% of before-tax
earnings to the plan. The Company's contributions to the plan are
discretionary. The Company made no contributions to the plan for the years
ended December 31, 1996 and 1997, respectively. Company contributions to the
plan were approximately $8 for the period ended July 31, 1998.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
CSW Enterprises, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of CSW
Enterprises, Inc. and Subsidiary (the Company) as of December 31, 1997 and
August 7, 1998, and the related consolidated statements of income and retained
earnings and cash flows for the years ended December 31, 1996 and 1997 and for
the period from January 1, 1998 to August 7, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of CSW Enterprises, Inc. and Subsidiary as of December 31, 1997 and August 7,
1998, and the consolidated results of its operations and its consolidated cash
flows for the years ended December 31, 1996 and 1997 and period from January 1,
1998 to August 7, 1998, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Chicago, Illinois
September 3, 1999

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CSW ENTERPRISES, INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

ASSETS
Current assets:
Cash.................................................. $ 828 $ 256
Accounts receivable, net of allowance for doubtful
accounts of $45...................................... 756 849
Inventories........................................... 818 933
Deferred income taxes................................. 187 237
Other current assets.................................. 43 62
------ ------
Total current assets.................................... 2,632 2,337

Property, plant, and equipment, net..................... 1,711 1,665
Other assets............................................ 40 5
------ ------
Total assets............................................ $4,383 $4,007
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable...................................... $ 280 $ 401
Accrued expenses...................................... 429 529
Income taxes payable.................................. 21 143
Due to stockholders................................... 800 --
Current portion of long-term debt..................... 164 229
------ ------
Total current liabilities............................... 1,694 1,302

Long-term debt, less current portion.................... 427 254

Stockholders' equity:
Common stock, $1 par value; 5,000 shares authorized;
524 shares issued and outstanding.................... 1 1
Additional paid-in capital............................ 193 193
Retained earnings..................................... 2,068 2,257
------ ------
Total stockholders' equity.............................. 2,262 2,451
------ ------
Total liabilities and stockholders' equity.............. $4,383 $4,007
====== ======

See accompanying notes to consolidated financial statements.

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CSW ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(Dollars in thousands)

[Download Table]

Period
from
Year ended January 1,
December 31, 1998 to
-------------- August 7,
1996 1997 1998
------ ------ ----------

Net sales............................................ $6,792 $7,359 $4,811
Cost of goods sold................................... 4,551 4,701 3,097
------ ------ ------
Gross profit......................................... 2,241 2,658 1,714
Selling, general, and administrative expenses........ 1,910 2,178 1,365
------ ------ ------
Operating income..................................... 331 480 349
Other income, net.................................... 41 82 42
Interest expense..................................... (154) (139) (74)
------ ------ ------
Income before income taxes........................... 218 423 317
Income taxes......................................... 91 172 128
------ ------ ------
Net income........................................... 127 251 189
Retained earnings at beginning of period............. 1,690 1,817 2,068
------ ------ ------
Retained earnings at end of period................... $1,817 $2,068 $2,257
====== ====== ======

See accompanying notes to consolidated financial statements.

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CSW ENTERPRISES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

[Download Table]

Year Period
ended from
December January 1,
31, 1998 to
---------- August 7,
1996 1997 1998
---- ---- ----------

Operating activities
Net income............................................. $127 $251 $189
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................ 178 168 77
Deferred income taxes................................ (43) (5) (50)
Loss on sale of investments.......................... -- -- 24
Changes in operating assets and liabilities:
Accounts receivable................................ 93 (122) (93)
Inventories........................................ 69 (17) (115)
Other assets....................................... 59 (7) (17)
Accounts payable and accrued expenses.............. 140 18 221
Income taxes payable............................... 19 3 122
---- ---- ----
Net cash provided by operating activities.............. 642 289 358
Investing activities
Capital expenditures................................... (47) (84) (31)
Proceeds from sale of investments...................... -- -- 9
---- ---- ----
Net cash used in investing activities.................. (47) (84) (22)
Financing activities
Payments on long-term debt............................. (174) (160) (108)
Payments on notes due to stockholders.................. -- -- (800)
---- ---- ----
Net cash used in financing activities.................. (174) (160) (908)
---- ---- ----
Net increase (decrease) in cash........................ 421 45 (572)
Cash at beginning of period............................ 362 783 828
---- ---- ----
Cash at end of period.................................. $783 $828 $256
==== ==== ====

See accompanying notes to consolidated financial statements.

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CSW ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended December 31, 1996 and 1997 and the
period from January 1, 1998 to August 7, 1998

1. Description of Business and Presentation

CSW Enterprises, Inc. and Subsidiary (collectively the Company) is engaged in
the distribution of heavy-duty replacement parts from distribution centers and
provides services for heavy-duty vehicles in the Oklahoma City, Oklahoma,
metropolitan area. The Company's principal products include truck and trailer
brake, suspension, axle, and other replacement parts. The Company's customers
include independent distributors, general repair shops, independent trucking
businesses, major fleets, and other operators of heavy-duty equipment.

Effective August 7, 1998, the Company was purchased by Quality Distribution
Service Partners, Inc.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company.
All significant intercompany accounts and transactions have been eliminated in
consolidation.

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
cores and finished goods.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated
depreciation. Depreciation is principally computed using the straight-line
method over the respective estimated useful lives of the assets for financial
reporting purposes as follows: 5 to 8 years for machinery and equipment, 5 to
10 years for furniture and fixtures, 5 years for vehicles, and 5 to 39 years
for leasehold improvements. Leasehold improvements are stated at cost and
amortized over the shorter of the lease term or the useful life for leasehold
improvements. Depreciation and amortization was $178, 168, and $77 for the
years ended December 31, 1996 and 1997 and period ended August 7, 1998,
respectively.

Income Taxes

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

F-242

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CSW ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Long-Lived Assets

The Company evaluates its long-lived assets on an ongoing basis. Identifiable
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the related asset may be impaired. Whether
assets to be held and used are impaired is measured by a comparison of the
carrying amount of the asset to future undiscounted cash flows expected to be
generated by the asset. If the asset is determined to be impaired, the loss
recognized is measured by the amount by which the carrying value of the asset
exceeds its fair value.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash,
accounts receivable, other current assets, other assets, accounts payable, and
accrued expenses approximate fair value because of the short-term maturity of
these instruments.

Concentration of Credit Risk

The Company has two vendors with significant purchases of 14% and 10%,
respectively, for the year ended December 31, 1997, and 18% and 14%,
respectively, for the period ended August 7, 1998. The Company believes that
other suppliers could provide the Company's needs in comparable terms.

Use of Estimates

3. Inventories

Inventories are summarized as follows:

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

Cores............................................... $153 $135
Finished goods...................................... 665 798
---- ----
$818 $933
==== ====

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CSW ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Property, Plant, and Equipment

Property, plant, and equipment are summarized as follows:

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

Land and building.................................. $2006 $2,006
Leasehold improvements............................. 251 258
Machinery and equipment............................ 1,006 1,014
Furniture and fixtures............................. 79 79
Vehicles........................................... 210 226
------ ------
3,552 3,583
Less: Accumulated depreciation and amortization.... 1,841 1,918
------ ------
$1,711 $1,665
====== ======

5. Accrued Expenses

Accrued expenses are summarized as follows:

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

Profit sharing...................................... $293 $390
Employee compensation and benefits.................. 81 114
Other............................................... 55 25
---- ----
$429 $529
==== ====

6. Long-Term Debt

Long-term debt are summarized as follows:

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

Installment notes................................... $591 $483
Less: Current reclassification...................... 164 229
---- ----
$427 $254
==== ====

On October 1, 1992, the Company entered into an agreement providing for an
$877 installment note (Note I) to purchase land and a building. Note I is
payable in monthly principal and interest installments of $12 and bears
interest at the bank's prime rate (8.5% at August 7, 1998) plus 0.5% through
October 1, 2000.

On January 30, 1995, the Company entered into an agreement providing for a
$180 installment note (Note II) to finance building improvements. Note II is
payable in monthly principal and interest installments of $2 and bears interest
at the bank's prime rate (8.5% at August 7, 1998) plus 0.5% through February 1,
2005.

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CSW ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

On December 29, 1994, the Company entered into an agreement providing for a
$150 installment note (Note III) to finance computer needs. Note III is payable
in monthly principal and interest installments of $3 and bears interest at a
fixed rate of 9.0% through May 1, 2000.

The credit agreement covering the installment notes requires the Company to
comply with certain financial and nonfinancial covenants. The installment notes
are collateralized by substantially all assets of the Company and guaranteed by
stockholders of the Company.

Annual maturities of long-term debt are as follows for the years ending
August 7:

[Download Table]

1999.................................................................. $229
2000.................................................................. 167
2001.................................................................. 19
2002.................................................................. 20
2003.................................................................. 22
2004 and thereafter................................................... 26
----
$483
====

7. Operating Leases

The Company leases office equipment under noncancelable operating leases
which expire on various dates through 2005. Rent expense for such leases
approximated $6, $7, and $4 for the years ended December 31, 1996 and 1997, and
period ended August 7, 1998, respectively.

8. Income Taxes

Income taxes included in the consolidated statement of income consist of the
following:

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
-------------- August 7,
1996 1997 1998
------ ------ -----------

Current:
Federal....................................... $ 114 $ 150 $150
State......................................... 20 27 28
------ ------ ----
134 177 178
Deferred....................................... (43) (5) (50)
------ ------ ----
$ 91 $ 172 $128
====== ====== ====

Reconciliation of the effective income tax rate computed at the U.S. federal
statutory tax rate to income tax expense is as follows:

[Download Table]

Year Period from
ended January 1,
December 31, 1998 to
------------ August 7,
1996 1997 1998
---- ---- -----------

Income taxes at U.S. federal statutory rate....... 34.0% 34.0% 34.0%
State income taxes, net of federal tax benefit.... 6.2 6.0 5.5
Other............................................. 1.5 0.7 0.9
---- ---- ----
41.7% 40.7% 40.4%
==== ==== ====

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CSW ENTERPRISES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Significant components of the Company's deferred income taxes are as follows:

[Download Table]

December 31, August 7,
1997 1998
------------ ---------

Inventory obsolescence reserve...................... $ 34 $ 34
Allowance for doubtful accounts..................... 18 18
Employee compensation and benefits.................. 135 185
---- ----
Deferred tax asset.................................. $187 $237
==== ====

9. Related Party Transactions

As of August 7, 1998, the Company sold investments held in property to a
stockholder of the Company for proceeds approximating $9. A loss of $24 on the
sale was recognized for the difference between the financial statement carrying
amounts and the proceeds received in the transaction. The proceeds received
approximate fair value based on an appraisal from a third party.

The Company had notes payable due to certain stockholders of the Company
totaling $800 outstanding at December 31, 1997. During the period ended August
7, 1998, the Company paid these notes in full and no balances remained
outstanding.

10. Employee Savings Plan

The Company sponsors a defined-contribution plan to provide substantially all
employees of the Company an opportunity to accumulate personal funds for their
retirement. Employees may contribute up to 15% of before-tax earnings to the
plan, and the Company matches up to 2% of the employees' contributions to the
plan. For the year ended December 31, 1996, no Company matching contributions
were made to the Plan. Company matching contributions to the plan were
approximately $18 and $21 for the year ended December 31, 1997 and the period
ended August 7, 1998, respectively.

11. Supplemental Cash Flow Information

The following table provides supplemental cash flow data to the information
provided in the consolidated statement of cash flows:

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
------------- August 7,
1996 1997 1998
------ ------ -----------

Cash paid for:
Income taxes.................................... $ 101 $ 176 $137
Interest........................................ 154 139 74

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Holt Incorporated

We have audited the accompanying consolidated balance sheet of Holt
Incorporated and Subsidiaries (the Company) as of August 7, 1998, and the
related consolidated statements of income and retained earnings and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Holt
Incorporated and Subsidiaries at August 7, 1998, and the consolidated results
of their operations and their consolidated cash flows for the year then ended
in conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
December 11, 1998

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HOLT INCORPORATED

CONSOLIDATED BALANCE SHEET
August 7, 1998
(Dollars in Thousands, Except Per Share Data)

[Download Table]

ASSETS
Current assets:
Cash.................................................................. $ 33
Accounts receivable, net of allowance for doubtful accounts of $43.... 928
Inventories........................................................... 3,081
Deferred income taxes................................................. 333
Other current assets.................................................. 94
------
Total current assets................................................ 4,469
Property, plant, and equipment, net..................................... 363
------
Total assets........................................................ $4,832
======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit.............................................. $1,970
Accounts payable...................................................... 1,377
Accrued expenses...................................................... 404
Current portion of long-term debt..................................... 54
Current portion of capital lease obligations.......................... 48
------
Total current liabilities........................................... 3,853
Long-term debt, less current portion.................................... 27
Capital lease obligations, less current portion......................... 79
Stockholders' equity:
Common stock, $10 par value; 100,000 shares authorized shares; 2,710
shares issued and outstanding........................................ 27
Retained earnings..................................................... 846
------
Total stockholders' equity.......................................... 873
------
Total liabilities and stockholders' equity.......................... $4,832
======

See accompanying notes to consolidated financial statements.

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HOLT INCORPORATED

CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Year ended August 7, 1998
(Dollars in Thousands)

[Download Table]

Net sales.............................................................. $14,193
Cost of goods sold..................................................... 9,510
-------
Gross profit........................................................... 4,683
Selling, general, and administrative expenses.......................... 4,432
-------
Operating income....................................................... 251
Other income........................................................... 57
Interest expense....................................................... (249)
-------
Income before income taxes............................................. 59
Income taxes........................................................... 26
-------
Net income............................................................. 33
Retained earnings at August 6, 1997.................................... 813
-------
Retained earnings at August 7, 1998.................................... $ 846
=======

See accompanying notes to consolidated financial statements.

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HOLT INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended August 7, 1998
(Dollars in Thousands)

[Download Table]

Operating activities
Net income............................................................. $ 33
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization........................................ 190
Deferred income taxes................................................ (6)
Gain on sale of equipment............................................ (17)
Changes in operating assets and liabilities:
Accounts receivable................................................ 437
Inventories........................................................ (174)
Other current assets............................................... (31)
Accounts payable and accrued expenses.............................. (27)
-----
Net cash provided by operating activities.............................. 405

Investing activities
Proceeds from sale of equipment........................................ 28
Capital expenditures................................................... (45)
-----
Net cash used in investing activities.................................. (17)

Financing activities
Net payments on revolving line of credit............................... (142)
Payments on long-term debt............................................. (109)
Net payments on related party notes.................................... (137)
Payments on capital lease obligations.................................. (21)
-----
Net cash used in financing activities.................................. (409)
-----
Net decrease in cash................................................... (21)
Cash at August 8, 1997................................................. 54
-----
Cash at August 7, 1998................................................. $ 33
=====

See accompanying notes to consolidated financial statements.

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HOLT INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended August 7, 1998
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

Holt Incorporated and Subsidiaries (collectively the Company) are engaged in
the distribution of heavy-duty replacement parts and provide services for
heavy-duty vehicles primarily throughout the midwest United States. The
Company's principal products include truck and trailer wheels, rims, brakes,
suspensions, axles, electrical, and other replacement parts. The Company's
customers include independent distributors, general repair shops, independent
trucking businesses, major fleets, and other operators of heavy-duty equipment.

Effective August 7, 1998, the Company was sold to Quality Distribution
Service Partners, Inc. (QDSP). The Company's fiscal year end is July 31. In
connection with the sale of the Company to QDSP, the financial statements are
presented as of August 7, 1998, and for the year then ended.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, Stats Remanufacturing Center, Inc. and Four T
Sales & Service, Inc. All significant intercompany transactions and balances
have been eliminated in consolidation.

Inventories

Inventories are lower of cost or market and consist primarily of finished
goods. The cost of inventories are determined using average cost, which
approximates the first in, first out (FIFO) method.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed using the straight-line and accelerated methods over
the respective estimated useful lives of the assets for financial reporting
purposes as follows: 3 to 8 years for machinery and equipment, 5 years for
vehicles, and 15 years for leasehold improvements. Depreciation and
amortization was $190 for the year ended August 7, 1998.

Income Taxes

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HOLT INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Long-Lived Assets

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for variable-
rate long-term debt, including current portion, approximate fair-value, as the
underlying long-term debt instruments are comprised of notes that are repriced
on a short-term basis.

Concentration of Credit Risk

Use of Estimates

3. Property and Equipment

Property and equipment consist of the following at August 7, 1998:

[Download Table]

Leasehold improvements............................................. $ 141
Machinery and equipment............................................ 1,393
Vehicles........................................................... 556
------
2,090
Less: Accumulated depreciation..................................... 1,727
------
$ 363
======

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HOLT INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4. Revolving Line of Credit

The Company maintains a revolving line of credit (Revolver) providing for
borrowings of up to $3.0 million including letters of credit of up to $50 for
working capital purposes. The Revolver bears interest payable monthly at the
bank's prime rate (8.5% at August 7, 1998) plus 1.0%. Amounts advanced are due
on October 31, 1998, subject to certain lending restrictions and financial and
nonfinancial covenants, collateralized by substantially all assets of the
Company and guaranteed by a majority stockholder. At August 7, 1998, the
Company had no outstanding letters of credit and an unused portion of the
Revolver of approximately $1.0 million.

5. Long-Term Debt

Long-term debt at August 7, 1998, consists of the following:

[Download Table]

Term loan............................................................. $35
Installment loans..................................................... 46
---
81
Less: Current maturities.............................................. 54
---
$27
===

On August 17, 1994, the Company entered into an agreement providing for a
$150 term loan (Term Loan) to refinance an existing term loan. The Term Loan is
payable in monthly principal and interest installments of $7 and bears interest
payable monthly at the bank's prime rate (8.5% at August 7, 1998) plus 2.0%
through August 1999. The Term Loan requires the Company to comply with certain
financial and nonfinancial covenants and is collateralized by substantially all
assets of the Company and guaranteed by a majority stockholder.

Installment notes for vehicles are payable in quarterly principal and
interest installments, bear interest at rates varying from 3.9% to 9.9%, mature
ranging from October 1998 through February 2002 and are collateralized by
vehicles.

Annual maturities of the Company's long-term debt are as follows at August 7,
1998:

[Download Table]

Year ending August 7:
1999................................................................. $54
2000................................................................. 16
2001................................................................. 9
2002................................................................. 2
2003 and thereafter.................................................. --
---
$81
===

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HOLT INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Capital Leases

Future minimum lease payments under capital leases with initial or remaining
terms of one year or more consisted of the following at July 31, 1998:

[Download Table]

1999................................................................. $ 49
2000................................................................. 41
2001................................................................. 38
2002................................................................. 22
----
Total minimum payments............................................... 150
Less: Amounts representing interest.................................. 23
----
Present value of minimum lease payments.............................. 127
Less: Current portion................................................ 48
----
Total long-term portion.............................................. $ 79
====

Vehicles leased under capital leases, net of accumulated depreciation of $26,
were approximately $130 at July 31, 1998.

7. Operating Leases

The Company leases buildings under noncancelable operating leases from a
partnership owned by stockholders of the Company. The leases expire at various
dates through 2001. Rent under the operating leases to this related party was
$123 for the year ended August 7, 1998.

Additionally, the company leases machinery and equipment under operating
leases from unaffiliated entities. The leases expire at various dates through
2002. Rent expense approximated $287 for the year ended August 7, 1998.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows at August 7, 1998:

[Download Table]

1999.................................................................. $377
2000.................................................................. 271
2001.................................................................. 250
2002.................................................................. 77
----
$975
====

8. Income Taxes

The income tax expense consists of the following for the period ended August
7, 1998:

[Download Table]

Current:
Federal............................................................. $28
State............................................................... 4
---
32
Deferred.............................................................. (6)
---
$26
===

F-254

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HOLT INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Reconciliation of effective income tax rate computed at the U.S. federal
statutory tax rate to the income tax expense is as follows for the period ended
August 7, 1998:

[Download Table]

Federal taxes at statutory rate...................................... 34.0%
State income taxes, net of federal benefit........................... 5.4
Other................................................................ 4.7
----
Income tax expense................................................... 44.1%
====

Significant components of the Company's deferred income taxes at August 7,
1998, are as follows:

[Download Table]

Deferred tax assets:
Allowance for receivables.......................................... $ 16
Inventory reserve.................................................. 213
Other.............................................................. 104
----
Total deferred tax assets............................................ $333
====

9. Related Parties

As described in Note 7, the Company leases buildings from JDH Investments, a
partnership owned by stockholders of the Company. The lease expense related to
these leases was financed by JDH Investments. A net payment of $137 was made on
the balance of the financing of the leases. No balance remained outstanding at
August 7, 1998.

10. Employee Savings and Profit-Sharing Plans

The Company sponsors a defined-contribution plan to provide substantially all
employees of the Company an opportunity to accumulate personal funds for their
retirement subject to minimum duration of employment requirements.
Participating employees may contribute up to 15% of before-tax earnings to the
plan which are matched by the Company up to the lesser of 25% of the employees'
contribution or two hundred and fifty dollars. Company matching contributions
to the plan were $7 for the year ended August 7, 1998.

The Company has a profit-sharing plan that covers employees who have
completed one year of service and attained the age of twenty-one. Contributions
to the profit-sharing plan are determined by the Board of Directors of the
Company and were $20 for the year ended August 7, 1998.

11. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the consolidated statement of cash flows for the year
ended August 7, 1998:

[Download Table]

Cash paid for:
Income taxes........................................................ $232
Interest............................................................ 249

F-255

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Sharkey Family Holdings, Inc.

We have audited the accompanying balance sheets of Sharkey Family Holdings,
Inc. (d/b/a Universal Joint Sales Company), as of December 31, 1997 and July
31, 1998, and the statements of income, stockholders' equity, and cash flows
for the year ended December 31, 1997 and period from January 1, 1998 to July
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Universal Joint Sales Company
at December 31, 1997 and July 31, 1998, and the results of their operations and
their cash flows for the year ended December 31, 1997 and period from January
1, 1998 to July 31, 1998, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

Chicago, Illinois
December 18, 1998

F-256

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UNIVERSAL JOINT SALES COMPANY

BALANCE SHEETS
(Dollars in thousands, except per share data)

[Download Table]

July
December 31, 31,
1997 1998
------------ ------
ASSETS
------

Current assets:
Cash.................................................... $ -- $ 141
Accounts receivable, less allowance for doubtful
accounts of $65........................................ 1,864 2,134
Inventories............................................. 4,583 5,518
Current portion of rebates receivable................... 457 183
Due from stockholders................................... -- 40
Other current assets.................................... 61 62
------ ------
Total current assets.................................. 6,965 8,078
Property, plant, and equipment, net..................... 1,143 1,143
Rebates receivable, less current portion................ 232 599
Other assets............................................ 103 102
------ ------
Total assets.......................................... $8,443 $9,922
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Revolving line of credit................................ $ 880 $1,180
Accounts payable........................................ 1,760 2,348
Accrued expenses........................................ 250 325
Due to stockholders..................................... 180 --
Current portion of long-term debt....................... 409 381
Current portion of capital lease obligation............. 27 32
------ ------
Total current liabilities............................. 3,506 4,266
Long-term debt, less current portion...................... 723 540
Capital lease obligation, less current portion............ 45 24
Stockholders' equity:
Common stock, Class A voting, no par value, 100 shares
authorized, issued, and outstanding.................... -- --
Common stock, Class B nonvoting, $.00001 par value,
1,000,000 shares authorized, issued, and outstanding... -- --
Additional paid-in capital.............................. 372 372
Retained earnings....................................... 3,914 4,903
Cost of 1,000 shares of common stock in treasury........ (117) (183)
------ ------
Total stockholders' equity............................ 4,169 5,092
------ ------
Total liabilities and stockholders' equity............ $8,443 $9,922
====== ======

See notes to financial statements.

F-257

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UNIVERSAL JOINT SALES COMPANY

STATEMENTS OF INCOME
(Dollars in thousands)

[Download Table]

Period from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ -----------

Net sales.............................................. $24,248 $15,122
Cost of goods sold..................................... 16,011 9,548
------- -------
Gross profit........................................... 8,237 5,574
Selling, general, and administrative expenses.......... 7,871 4,525
------- -------
Operating income................................. 366 1,049
Interest expense....................................... (237) (86)
Other income........................................... 118 49
------- -------
Income before income taxes............................. 247 1,012
Income taxes........................................... 7 23
------- -------
Net income............................................. $ 240 $ 989
======= =======

See notes to financial statements.

F-258

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UNIVERSAL JOINT SALES COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY
Year ended December 31, 1997 and
period from January 1, 1998 to July 31, 1998

[Download Table]

Cost of
Additional Common Total
Common Paid-In Retained Stock in Stockholders'
Stock Capital Earnings Treasury Equity
------ ---------- -------- -------- -------------

Balance at January 1, 1997.. $134 $238 $4,510 $(117) $4,765
Distributions to
stockholders'.............. -- -- (836) -- (836)
Net income.................. -- -- 240 -- 240
---- ---- ------ ----- ------
Balance at December 31,
1997....................... 134 238 3,914 (117) 4,169
Purchase of common stock for
treasury................... -- -- -- (66) (66)
Net income.................. -- -- 989 -- 989
---- ---- ------ ----- ------
Balance at July 31, 1998.... $134 $238 $4,903 $(183) $5,092
==== ==== ====== ===== ======

See notes to financial statements.

F-259

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UNIVERSAL JOINT SALES COMPANY

STATEMENTS OF CASH FLOWS
(Dollars in thousands)

[Download Table]

Period
from
January 1,
Year ended 1998 to
December 31, July 31,
1997 1998
------------ ----------

Operating activities
Net income............................................. $ 240 989
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 291 132
Gain on sale of property, plant, and equipment..... (2) (14)
Changes in operating assets and liabilities:
Accounts receivable.............................. (88) (270)
Inventories...................................... 283 (935)
Other assets..................................... (100) (93)
Accounts payable and accrued expenses............ 474 662
------- ----
Net cash provided by operating activities...... 1,098 471
Investing activities
Capital expenditures................................... (272) (169)
Proceeds from sale of property, plant, and equipment... 34 64
------- ----
Net cash used in investing activities.................. (238) (105)
Financing activities
Payments on amounts due to stockholders................ (40) (220)
Net proceeds from revolving line of credit............. 130 300
Payments on long-term debt............................. (382) (223)
Payments on capital lease obligation................... (13) (16)
Purchase of treasury stock............................. -- (66)
Distributions.......................................... (836) --
------- ----
Net cash used in financing activities.......... (1,141) (225)
------- ----
Net increase (decrease) in cash........................ (281) 141
Cash at beginning of period............................ 281 --
------- ----
Cash at end of period.................................. $ -- $141
======= ====

See notes to financial statements.

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS
Year ended December 31, 1997 and
period from January 1, 1998 to July 31, 1998
(Dollars in thousands)

1. Description of Business and Basis of Presentation

Sharkey Family Holdings, Inc. (d/b/a Universal Joint Sales Company) was
formed on January 1, 1998, through the combination of five companies controlled
through common ownership. The companies combined were: (i) Universal Joint
Sales Company inc., (ii) Universal Joint Sales of Buffalo, Inc.; (iii)
Universal Joint Sales of Watertown, Inc.; (iv) Driveshaft Specialists, Inc.;
and (v) Driveshaft Specialists of Jacksonville, Inc. Upon the combination of
these companies, the entities became divisions of Sharkey Family Holdings, Inc.
All references to the Company refer collectively to the combined entities prior
to January 1, 1998, and to Sharkey Family Holdings, Inc. subsequently.

The financial statements as of and for the year ended December 31, 1997 are
presented on a combined basis. All significant intercompany transactions and
balances have been eliminated.

The Company distributes heavy-duty replacement parts from distribution
centers and provides services for heavy-duty vehicles in New York,
Pennsylvania, and Florida. The Company's principal products include drive
lines, brakes, clutches, power takeoffs, front wheel drive components, and
other replacement parts.

Effective July 31, 1998, the Company was purchased by Quality Distribution
Service Partners, Inc.

2. Significant Accounting Policies

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on the first in, first out (FIFO) method, and consist primarily of
core and finished goods.

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed using the straight-line method over the
respective estimated useful lives of the assets for financial reporting
purposes as follows: 25 years for buildings, 5 to 7 years for furniture and
fixtures, 5 to 7 years for machinery and equipment, 5 years for vehicles, and
the shorter of the lease term or the useful life for leasehold improvements.
Depreciation and amortization was $291 and $132 for the year ended December 31,
1997 and period ended July 31, 1998, respectively.

Income Taxes

The Company has elected to be taxed as an S Corporation under the Internal
Revenue Code. Under these provisions, the Corporation does not pay federal
income tax at the corporate level. Instead shareholders are liable for
individual income taxes for the Company's taxable income. Therefore, no
provision or liability for federal income taxes have been included in the
financial statements for the Company. The Company is liable for various state
income taxes. Provisions of $7 and $23 were recorded for the year ended
December 31, 1997 and period ended July 31, 1998.

F-261

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS--(Continued)

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Long-Lived Assets

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash,
accounts receivable, rebates receivable, other current assets, accounts
payable, and accrued expenses approximate their fair value because of the
short-term maturity of these instruments.

The Company estimates the fair value of the long-term debt obligations
including current portions, using the discounted cash flow method with interest
rates currently available for similar obligations. The carrying amounts
reported in the Company's balance sheets for these obligations approximate fair
value.

Concentration of Credit Risk

Use of Estimates

3. Inventories

Inventories consist of the following:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Cores.................................................. $ 385 $1,439
Finished Goods......................................... 4,198 4,079
------ ------
$4,583 $5,518
====== ======

F-262

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Property, Plant, and Equipment

Property, plant, and equipment are summarized as follows:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Buildings and leasehold improvements................ $1,171 $1,170
Machinery and equipment............................. 1,441 1,511
Furniture and fixtures.............................. 821 821
Vehicles............................................ 631 652
------ ------
4,064 4,154
Less: Accumulated depreciation...................... 2,921 3,011
------ ------
$1,143 $1,143
====== ======

5. Rebates Receivable

The Company holds non-interest-bearing certificates of indebtedness from HD
America, Inc., a purchasing cooperative from whom the Company purchases a
significant amount of their inventory. The Company is eligible for various
discounts and rebates in the form of patronage dividends on their purchases
from the cooperative. Patronage dividends are earned annually and are received
in the following year in the form of cash and non-negotiable, non-interest-
bearing certificates of indebtedness. The Company has the ability to replace
this group of suppliers; however, it may not be at such favorable terms.

Annual maturities of the Company's rebates receivable are as follows at July
31, 1998:

[Download Table]

Period ending July 31:
1999.............................................................. $183
2000.............................................................. 176
2001.............................................................. 240
2002.............................................................. 183
----
$782
====

6. Revolving Line of Credit

The Company maintains a revolving line of credit providing for borrowings of
up to $1,250 bearing interest at the prime rate (8.5% at July 31, 1998) plus
0.25%. The revolving line of credit is renewable annually on July 31 and is
secured by substantially all assets of the Company and guaranteed by the
stockholders. As of July 31, 1998, $1,180 was outstanding on the line of
credit.

F-263

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Long-Term Debt

Long-term debts are summarized as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Installment notes.................................. $ 912 $790
Notes payable...................................... 128 69
Other notes payable................................ 92 62
------ ----
Total long-term debt............................... 1,132 921
Less: Current maturities........................... 409 381
------ ----
$ 723 $540
====== ====

In October 1994, the Company entered into an agreement providing for a $250
installment note to purchase machinery. The installment note is payable in
monthly principal installments of $4 and interest at the bank's prime rate
(8.5% at July 31, 1998) plus 1.0% through October 1999. The installment note is
guaranteed by the majority shareholder of the Company. The amount outstanding
under the installment note at July 31, 1998, was $63.

In August 1996, the Company entered into an agreement providing for a $300
installment note to purchase inventory. The installment note is payable in
monthly principal installments of $5 and interest at the bank's prime rate plus
1.0% through August 2001. The installment note is collateralized by inventory
and personally guaranteed by the majority stockholder of the Company. The
amount outstanding under the note at July 31, 1998, was $190.

In December 1996, the Company entered into an agreement providing for a $750
installment note to provide working capital. The installment note is payable in
monthly principal installments of $13 and interest at the bank's prime rate
plus 0.25% through December 2001. The installment note is personally guaranteed
by the majority stockholder of the Company. The amount outstanding under the
note at July 31, 1998, was $537.

The Company has two notes payable due to 805 Spencer Street Partnership, a
partnership owned by stockholders of the Company. The notes bear interest at
9.25% and are payable in monthly principal and interest installments of $8 and
$1 through December 1998 and June 2000, respectively.

The Company has entered into several notes payable (Notes) to purchase
automobiles and equipment. The Notes are payable in monthly principal and
interest installments and bear interest at rates varying from 6.65% to 11.95%
and mature through 2001. The Notes are collateralized by the vehicles and
equipment purchased with the loan proceeds.

Annual maturities of the Company's long-term debt are as follows at July 31,
1998:

[Download Table]

1999................................................................ $381
2000................................................................ 253
2001................................................................ 219
2002................................................................ 68
----
$921

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS--(Continued)

8. Capital Leases

Equipment under capital leases consists of the following:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Equipment.......................................... $84 $84
Less: Accumulated amortization..................... 14 30
--- ---
$70 $54
=== ===

Future minimum lease payments under capital leases with initial or remaining
terms of one year or more consist of the following at July 31, 1998:

[Download Table]

1999................................................................ $32
2000................................................................ 29
---
Total minimum lease payments........................................ 61
Amounts representing interest....................................... 5
---
Present value of minimum lease payments............................. 56
Less: Current portion............................................... 32
---
$24
===

9. Operating Leases

The Company leases buildings under operating leases from stockholders of the
Company. The leases expire at various dates through 2006. Rent expense under
the operating leases to the related parties was $814 and $497 for the year
ended December 31, 1997 and the period ended July 31, 1998, respectively.

Additionally, the Company leases equipment and vehicles under operating
leases from unaffiliated entities. The leases expire on various dates through
2001. Rent expense for such leases was $28 and $22 for the year ended December
31, 1997 and period ended July 31, 1998, respectively.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows at July 31, 1998:

[Download Table]

1999.............................................................. $ 499
2000.............................................................. 174
2001.............................................................. 138
2002.............................................................. 137
2003.............................................................. 76
2004 and thereafter............................................... 227
------
$1,251
======

10. Related Party Transactions

As described in Note 9, the Company leases buildings from stockholders of the
Company. In addition, the Company has notes payable with stockholders as
described in Note 7.

F-265

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UNIVERSAL JOINT SALES COMPANY

NOTES TO FINANCIAL STATEMENTS--(Continued)

11. Employee Savings Plan

The Company sponsors a qualified defined-contribution plan to provide
substantially all employees of the Company an opportunity to accumulate
personal funds for their retirement subject to minimum duration of employment
requirements. Participating employees may contribute up to 15% of before-tax
earnings to the plan. The Company will match up to 5% of employees'
contributions to the plan. Company contributions to the plan were $176 and $104
for the year ended December 31, 1997 and period ended July 31, 1998.

12. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the statements of cash flows:

[Download Table]

Period
Year ended ended
December 31, July 31,
1997 1998
------------ --------

Cash paid for:
Income taxes..................................... $ 14 $ 5
Interest......................................... 181 79

The Company issued $70 and $12 in notes payable to purchase vehicles and
machinery for the year ended December 31, 1997 and period ended July 31, 1998,
respectively.

F-266

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REPORT OF INDEPENDENT AUDITORS

Board of Directors
Fleetpride, Inc.

We have audited the accompanying balance sheets of Fleetpride, Inc. as of
December 31, 1997 and July 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1996 and
1997 and for the period from January 1, 1998 to July 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fleetpride, Inc. as of
December 31, 1997 and July 31, 1998, and the results of its operations and its
cash flows for the years ended December 31, 1996 and 1997, and period from
January 1, 1998 to July 31, 1998, in conformity with generally accepted
accounting principles.

/s/ Ernst & Young LLP

Chicago, Illinois
September 3, 1999

F-267

424B3 397th Page of 423 TOC 1st Previous Next ↓Bottom Just 397th
FLEETPRIDE, INC.

BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)

[Download Table]

December 31, July 31,
1997 1998
------------ --------
ASSETS
------

Current assets:
Cash................................................... $ 10 $ 51
Accounts receivable, net of allowance for doubtful
accounts of $50....................................... 1,923 2,306
Inventories............................................ 1,953 2,467
Deferred income taxes.................................. 253 255
Other current assets................................... 537 224
------ ------
Total current assets................................. 4,676 5,303
Property and equipment, net............................ 1,348 1,278
Deferred income taxes.................................. 43 31
Other assets........................................... 56 55
------ ------
Total assets......................................... $6,123 $6,667
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Revolving line of credit............................... $2,651 $2,589
Accounts payable....................................... 1,247 1,913
Accrued expenses....................................... 415 636
Current portion of long-term debt...................... 180 131
Current portion of capital lease obligations........... 247 182
------ ------
Total current liabilities............................ 4,740 5,451
Long-term debt, less current portion................... 133 93
Capital lease obligations, less current portion........ 180 169
Stockholders' equity:
Preferred stock: $1,000 stated value; 400 shares
authorized, issued, and outstanding 400 400
Common stock: $10 par value; 5,000 shares authorized,
3,805 shares issued, and 950 outstanding.............. 38 38
Additional paid-in capital............................. 283 283
Retained earnings...................................... 824 708
Accumulated other comprehensive loss:
Unrealized loss on securities available-for-sale....... (52) (52)
Cost of 2,855 shares of common stock in treasury....... (423) (423)
------ ------
Total stockholders' equity........................... 1,070 954
------ ------
Total liabilities and stockholders' equity........... $6,123 $6,667
====== ======

See accompanying notes to financial statements.

F-268

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FLEETPRIDE, INC.

STATEMENTS OF OPERATIONS
(Dollars in Thousands)

[Download Table]

Year ended Period from
December 31, January 1,
---------------- 1998 to
1996 1997 July 31, 1998
------- ------- -------------

Net sales............... $27,152 $19,833 $12,830
Cost of goods sold...... 19,927 12,860 8,436
------- ------- -------
Gross profit............ 7,225 6,973 4,394
Selling, general, and
administrative
expenses............... 6,608 6,867 4,336
------- ------- -------
Operating income........ 617 106 58
Interest expense........ (387) (318) (195)
------- ------- -------
Income (loss) before
income taxes........... 230 (212) (137)
Income taxes (benefit).. 114 (60) (39)
------- ------- -------
Net income (loss)....... $ 116 $ (152) $ (98)
======= ======= =======

See accompanying notes to financial statements.

F-269

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FLEETPRIDE, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in Thousands)

[Enlarge/Download Table]

Accumulated Cost of
Additional Other Common Total
Preferred Common Paid-In Retained Comprehensive Stock in Stockholders'
Stock Stock Capital Earnings Loss Treasury Equity
--------- ------ ---------- -------- ------------- -------- -------------

Balance at January 1,
1996................... $400 $38 $283 $ 932 $ -- $(423) $1,230
Net income.............. -- -- -- 116 -- -- 116
Preferred stock
dividends.............. -- -- -- (36) -- -- (36)
Change in unrealized
loss on securities
available for sale..... -- -- -- -- (49) -- (49)
---- --- ---- ----- ---- ----- ------
Balance at December 31,
1996................... 400 38 283 1,012 (49) (423) 1,261
Net loss................ -- -- -- (152) -- -- (152)
Preferred stock
dividends.............. -- -- -- (36) -- -- (36)
Change in unrealized
loss on securities
available for sale..... -- -- -- -- (3) -- (3)
---- --- ---- ----- ---- ----- ------
Balance at December 31,
1997................... 400 38 283 824 (52) (423) 1,070
Net loss................ -- -- -- (98) -- -- (98)
Preferred stock
dividends.............. -- -- -- (18) -- -- (18)
---- --- ---- ----- ---- ----- ------
Balance at July 31,
1998................... $400 $38 $283 $ 708 $(52) $(423) $ 954
==== === ==== ===== ==== ===== ======

See accompanying notes to financial statements.

F-270

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FLEETPRIDE, INC.

STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

[Download Table]

Year ended Period from
December 31, January 1,
------------- 1998 to
1996 1997 July 31, 1998
------ ----- -------------

Operating activities
Net income (loss)................................ $ 116 $(152) $ (98)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 251 277 215
Deferred income taxes............................ (21) (70) 10
Changes in operating assets and liabilities:
Accounts receivable.............................. 974 (127) (383)
Inventories...................................... 1,017 10 (514)
Other assets..................................... 257 96 314
Accounts payable and accrued expenses............ (935) (75) 887
------ ----- -----
Net cash provided by (used in) operating
activities...................................... 1,659 (41) 431
Investing activities
Capital expenditures............................. (172) (184) (103)
------ ----- -----
Net cash used in investing activities............ (172) (184) (103)
Financing activities
Net proceeds (borrowings) from revolving line of
credit (1,195) 570 (62)
Payments on other long-term debt................. (166) (173) (89)
Payments on capital lease obligations............ (108) (150) (118)
Dividends paid................................... (36) (36) (18)
------ ----- -----
Net cash provided by (used in) financing
activities...................................... (1,505) 211 (287)
------ ----- -----
Net increase (decrease) in cash.................. (18) (14) 41
Cash at beginning of period...................... 42 24 10
------ ----- -----
Cash at end of period............................ $ 24 $ 10 $ 51
====== ===== =====

See accompanying notes to financial statements.

F-271

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1996 and 1997 and
period from January 1, 1998 to July 31, 1998
(Dollars in Thousands)

1. Description of Business and Basis of Presentation

Fleetpride, Inc. (the Company) distributes heavy-duty replacement parts from
distribution centers and provides services for heavy-duty vehicles primarily
throughout the Northeastern United States. The Company's principal products
include truck and trailer wheel, brake, suspension, body, and other replacement
parts. The Company's customers include independent distributors, general repair
shops, independent trucking businesses, major fleets, and other operators of
heavy-duty equipment.

Effective July 31, 1998, the Company was purchased by Quality Distribution
Service Partners, Inc.

2. Summary of Significant Accounting Policies

Inventories

Inventories are valued at the lower of cost or market, with cost being
determined on an average basis, which approximates first in, first out (FIFO)
method.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the respective
estimated useful lives of the assets for financial reporting purposes as
follows: 6 to 12 years for machinery and equipment, 5 to 12 years for furniture
and fixtures, 5 years for vehicles, and the shorter of the lease term or the
useful life for leasehold improvements. Depreciation and amortization was $251,
$277, and $215 for the year ended December 31, 1996 and 1997 and period ended
July 31, 1998, respectively.

Income Taxes

Revenue Recognition

Revenue is recognized when products are shipped or services are performed.

Long-lived Assets

The Company evaluates its long-lived assets on an ongoing basis. Such assets
are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

related asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of the asset to future
undiscounted cash flows expected to be generated by the asset. If the asset is
determined to be impaired, the impairment recognized is measured by the amount
by which the carrying value of the asset exceeds its fair value.

Fair Value of Financial Instruments

The carrying amounts reported in the Company's balance sheet for cash, trade
accounts receivable, other current assets, accounts payable, and accrued
expenses approximate their fair value because of the short-term maturity of
these instruments. The fair value of investments in marketable securities is
estimated based on quotes from brokers or current rates offered for instruments
with similar characteristics.

Concentration of Credit Risk

Use of Estimates

3. Investments

Available-for-sale marketable securities, classified as other current assets,
are accounted for at market prices with the unrealized loss shown as a separate
component of stockholders' equity. They consisted of the following:

[Download Table]

Amortized Unrealized Market
Cost Loss Value
--------- ---------- ------

December 31, 1997 Common stock................. $65 $(52) $13
July 31, 1998 Common stock..................... 65 (52) 13

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

4. Inventories

Inventories consist of the following:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Cores.................................................. $ 373 $ 398
Finished goods......................................... 1,580 2,069
------ ------
$1,953 $2,467
====== ======

5. Property and Equipment

Property and equipment consist of the following:

[Download Table]

July
December 31, 31,
1997 1998
------------ ------

Machinery and equipment.............................. $1,124 $1,166
Furniture and fixtures............................... 787 828
Vehicles............................................. 890 930
Leasehold improvements............................... 587 609
------ ------
3,388 3,533
Less: Accumulated depreciation
and amortization..................................... 2,040 2,255
------ ------
$1,348 $1,278
====== ======

6. Accrued Expenses

Accrued expenses consist of the following:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Employee compensation and benefits................... $315 $431
Core inventory to be returned........................ 49 128
Interest............................................. 18 23
Other................................................ 33 54
---- ----
$415 $636
==== ====

7. Revolving Line of Credit

The Company maintains a revolving line of credit (Revolver) providing for
borrowings of up to $2,750 including letters of credit of up to $150. The
Revolver bears interest payable monthly at the bank's prime rate (8.5% at July
31, 1998) plus .75%. Amounts advanced are due on demand, subject to certain
lending restrictions, collateralized by substantially all assets of the Company
and guaranteed by a majority stockholder. At July 31, 1998, the Company had no
outstanding letters of credit, and an unused portion of the Revolver of $161.

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

8. Long-term Debt

Long-term debt are summarized as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Term loan............................................ $213 $173
Note payable......................................... 100 51
---- ----
313 224
Less: Current maturities............................. 180 131
---- ----
$133 $ 93
==== ====

The term loan (Term Loan) is payable in monthly principal and interest
installments of $7 and bears interest payable monthly at the bank's prime rate
plus 0.75% through March 2000. The Term Loan requires the Company to comply
with certain financial and nonfinancial covenants and is collateralized by
substantially all assets of the Company and guaranteed by a majority
stockholder.

A note payable for inventory and equipment is payable in quarterly principal
and interest installments of $26 through November 1998, bears interest at 7.0%
and is guaranteed by a majority stockholder.

Annual maturities of the Company's debt are as follows for the years ending
July 31:

[Download Table]

1999.................................................................. $131
2000.................................................................. 80
2001.................................................................. 13
----
$224
====

9. Capital Leases

Vehicles under capital leases consist of the following:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Vehicles............................................. $ 827 $ 869
Less: Accumulated amortization....................... (428) (547)
----- -----
$ 399 $ 322
===== =====

Future minimum lease payments under capital leases with initial or remaining
terms of one year or more consisted of the following for the years ending July
31:

[Download Table]

1999................................................................. $195
2000................................................................. 120
2001................................................................. 68
2002................................................................. 8
----
Total minimum payments............................................... 391
Less: Amounts representing interest.................................. 40
----
Present value of minimum lease payments.............................. 351
Less: Current portion................................................ 182
----
Total long-term portion.............................................. $169
====

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

10. Operating Leases

The Company leases buildings under operating leases for some of its
distribution and service centers from certain stockholders of the Company. The
leases expire at various dates through 2018. Rent expense under the operating
leases to these related parties was $422, $415, and $272 for the years ended
December 31, 1996 and 1997 and for the period ended July 31, 1998,
respectively.

Additionally, the Company leases buildings, machinery and equipment, and
vehicles under operating leases from unaffiliated entities. These leases expire
on various dates through 2001. Rent expense for such leases was $275, $304, and
$167 for the years ended December 31, 1996 and 1997 and for the period ended
July 31, 1998, respectively.

Future minimum lease payments under operating leases with terms in excess of
one year are as follows for the years ending July 31:

[Download Table]

1999................................................................ $ 574
2000................................................................ 421
2001................................................................ 397
2002................................................................ 314
2003................................................................ 338
2004 and thereafter................................................. 2,875
------
$4,919
======

11. Income Taxes

The income taxes (benefit) consist of the following:

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
1996 1997 July 31, 1998
------ ------ -------------

Current:
Federal.................................... $ 119 $ 9 $(43)
State...................................... 16 1 (6)
------ ------ ----
135 10 (49)
Deferred..................................... (21) (70) 10
====== ====== ====
$ 114 $ (60) $(39)
====== ====== ====

Reconciliation of effective income tax rate computed at the U.S. federal
statutory tax rate to income taxes (benefit) are as follows:

[Download Table]

Period from
Year ended January 1,
December 31, 1998 to
1996 1997 July 31, 1998
------ ------ -------------

Income taxes at U.S. federal statutory
rate...................................... 34.0% (34.0)% (34.0)%
State income taxes, net of federal tax
benefit................................... 5.7 (3.5) (3.3)
Other...................................... 9.9 9.2 8.8
----- ------ -----
Income taxes............................... 49.6% (28.3)% (28.5)%
===== ====== =====

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

Significant components of the Company's deferred income taxes are as follows:

[Download Table]

December 31, July 31,
1997 1998
------------ --------

Deferred tax assets:
Inventory obsolescence reserve..................... $131 $131
Allowance for doubtful accounts.................... 19 19
Amortization of noncompete agreement............... 116 112
Employee compensation and benefits................. 77 77
Other.............................................. 33 29
---- ----
376 368
Deferred tax liabilities:
Accelerated depreciation........................... 80 82
---- ----
Net deferred tax asset............................... $296 $286
==== ====

12. Related Party Transactions

As described in Note 10, the Company leases some buildings from certain
stockholders of the Company.

The Company sells products in the ordinary course of business to companies
owned by certain stockholders of the Company. Sales for the years ended
December 31, 1996 and 1997 and for the period ended July 31, 1998, approximated
$130, $428, and $228, respectively.

In September 1996, the Company discontinued selling new and used trailers and
truck bodies and sold its related equipment inventory at cost of $2,007 to a
stockholder of the Company. Noncash proceeds from the sale of the equipment
inventory were received in the form of a $1,767 equipment inventory notes
payable assumed by the purchaser and a $240 note receivable accepted by the
Company.

13. Preferred Stock

The holders of preferred stock are entitled to receive semiannual cumulative
dividends at the rate of 9% on the $1,000 stated value of the preferred stock.
There are no accumulated dividends in arrears as of December 31, 1997 and July
31, 1998.

The Company may redeem all or a portion of the preferred stock at any time
prior to the fourth anniversary of that investor's purchase.

14. Employee Savings Plan

The Company sponsors a defined-contribution plan to provide substantially all
employees of the Company an opportunity to accumulate personal funds for their
retirement, subject to minimum duration of employment requirements. Employees
may contribute up to 15% of before-tax earnings to the plan. The plan is
structured in the form of a 401(k). The Company matches a portion of the
employees' contributions as determined by the provision of the plan. The
Company's contribution to the plan for any year, as determined by the Board of
Directors, is discretionary, but in no event will

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FLEETPRIDE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

it exceed the amount deductible for income tax purposes. There were no Company
contributions to the plan for the years ended December 31, 1996 or 1997 and
period ended July 31, 1998.

15. Commitments and Contingencies

Prior to 1997, the Company's former equipment division customers financed
trailer purchases through a finance company, whereby the Company arranged to
receive a fee for each sale being financed. Under this agreement, the Company
was liable for 25% of the related outstanding loan, in the event the customer
went into default. As of July 31, 1998, total loans outstanding are $848 and
the maximum exposure for the Company is $212. The Company does not currently
believe that potential additional expenses for customers in default will have a
material adverse effect on the financial condition or results of operations of
the Company and, as such, no reserve has been recorded as of July 31, 1998.

16. Supplemental Cash Flow Information

The following table provides supplemental cash flow data in addition to the
information provided in the statement of cash flows:

[Download Table]

Year ended Period from
December 31, January 1,
------------- 1998 to
1996 1997 July 31, 1998
------ ------ -------------

Cash paid (received) for:
Income taxes................................ $ 2 $ 91 $(63)
Interest.................................... 464 317 193

Capital lease obligations of $180 and $42 were incurred when the Company
entered into leases for equipment for the year ended December 31, 1997 and
period ended July 31, 1998, respectively.

As described in Note 12, the Company sold equipment inventory for noncash
proceeds of $2,007.

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REPORT OF INDEPENDENT ACCOUNTANTS

To Board of Directors and Stockholders of TBS Incorporated:

In our opinion, the accompanying balance sheets and related statements of
income and retained deficit and cash flows present fairly, in all material
respects, the financial position of TBS Incorporated (the "Company") at
December 31, 1997 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

September 10, 1999
Chicago, Illinois

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TBS INCORPORATED

BALANCE SHEETS
At December 31, 1997 and 1998
(amounts in thousands except for share data)

[Download Table]

1997 1998
------ ------
ASSETS
------

Current assets:
Cash and cash equivalents.................................... $ 19 $ --
Accounts receivable, less allowance for doubtful accounts of
$2 and $2 at 1997 and 1998 respectively..................... 306 322
Inventory.................................................... 441 582
Note receivable from related party........................... 22 28
Prepaid expenses and other current assets.................... 19 29
Rebate receivable............................................ 45 80
------ ------
Total current assets....................................... 852 1,041
Property and equipment, net.................................. 170 195
Goodwill, net................................................ 160 152
Deferred taxes............................................... 120 162
Other assets................................................. 42 7
------ ------
Total assets............................................... $1,344 $1,557
====== ======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
Bank overdraft............................................... $ -- $ 8
Line of credit............................................... 241 224
Current portion of long-term debt............................ 88 54
Accounts payable............................................. 321 482
Accrued taxes................................................ 84 99
Accrued liabilities.......................................... 50 53
------ ------
Total current liabilities.................................. 784 920
Long-term debt................................................. 341 400
------ ------
Total liabilities.......................................... 1,125 1,320
------ ------
Stockholders' equity:
Common stock of TBS Incorporated, $1 par value 1,000,000
shares authorized,
24,324 shares issued and outstanding........................ 24 24
Additional paid-in capital................................... 673 673
Retained deficit............................................. (478) (460)
------ ------
Total stockholders' equity................................. 219 237
------ ------
Total liabilities and stockholders' equity................. $1,344 $1,557
====== ======

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TBS INCORPORATED

STATEMENTS OF INCOME AND RETAINED DEFICIT
For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------ ------

Net sales.............................................. $2,641 $3,245 $3,724
Cost of sales.......................................... 1,970 1,912 2,696
------ ------ ------
Gross profit........................................... 671 1,333 1,028
Selling, general and administrative expenses........... 754 1,060 914
------ ------ ------
Operating income....................................... (83) 273 114
Other expense.......................................... (70) (87) (86)
------ ------ ------
Income before income taxes............................. (153) 186 28
Income taxes........................................... -- 75 10
------ ------ ------
Net income (loss) and comprehensive income (loss)...... (153) 111 18
Retained deficit, beginning of year.................... (436) (589) (478)
------ ------ ------
Retained deficit, end of year.......................... $ (589) $ (478) $ (460)
====== ====== ======

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TBS INCORPORATED

STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
----- ----- -----

Operating activities
Net income (loss) and comprehensive income (loss)........ $(153) $ 111 $ 18
Adjustments to reconcile net income to net cash provided
by operating activities:
Amortization of goodwill............................... -- 10 7
Depreciation and amortization.......................... 48 38 39
Provision for bad debt................................. (1) 2 --
Deferred taxes......................................... -- (4) (42)
Gain on sale of equipment, net......................... 3 -- --
Changes in operating assets and liabilities:
Accounts receivable.................................... (141) (90) (15)
Inventory.............................................. (57) (77) (141)
Prepaid expenses and other current assets.............. (10) (44) (52)
Other assets........................................... 3 (20) 35
Accounts payable....................................... (106) 68 160
Accrued liabilities.................................... (63) 75 18
----- ----- -----
Net cash provided by (used in) operating activities...... (477) 69 27
----- ----- -----
Investing activities
Acquisitions of property and equipment................... (32) (48) (63)
Proceeds from sale of property and equipment............. 3 -- --
----- ----- -----
Net cash used in investing activities.................... (29) (48) (63)
Financing activities
Bank overdraft........................................... (7) -- 8
Net change in line of credit............................. 124 67 (17)
Proceeds from issuance of debt........................... 435 147 173
Principal payments of long-term debt..................... (35) (211) (139)
Payments on obligations under capital leases............. (9) (7) (8)
----- ----- -----
Net cash provided (used) in financing activities......... 508 (4) 17
----- ----- -----
Net increase (decrease) in cash.......................... 2 17 (19)
Cash at beginning of year................................ -- 2 19
----- ----- -----
Cash at end of year...................................... $ 2 $ 19 $ --
===== ===== =====
Supplemental disclosure of cash flow information
Cash paid during year for interest..................... $ 55 $ 102 $ 79
===== ===== =====
Cash paid during year for taxes........................ $ -- $ -- $ 29
===== ===== =====

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TBS INCORPORATED

NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)

Note 1--Description of Business

TBS Incorporated (the "Company") engages in the sale of heavy duty truck
parts and servicing of medium and heavy duty vehicles. The Company is
headquartered in Tucson, Arizona and operates branches in both Tucson and
Phoenix, Arizona. The Company's primary markets are located in Arizona and
southwestern New Mexico.

Note 2--Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid instruments with original
maturities of three months or less from the date of purchase.

Inventory

Inventories consist of truck parts and cores, which are stated at the lower
of cost or market. Cost is determined using the average cost method.

Property and Equipment

Property and equipment is carried at cost less accumulated amortization and
depreciation. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets, which range from three to 31 years as
follows:

[Download Table]

Useful
Method Life
------ ------

Furniture and fixtures............................................... 5-7
Equipment............................................................ 3-7
Automobiles and trucks............................................... 3-5
Leasehold improvements............................................... 31

Goodwill

Revenue Recognition

Uses of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts

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TBS INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

Note 3--Inventory

The inventory balances at December 31, 1997 and 1998 consist of the
following:

[Download Table]

1997 1998
---- ----

Parts inventory.................................................... $408 $551
Cores.............................................................. 33 31
---- ----
$441 $582
==== ====

Note 4--Property and Equipment

Property and equipment are recorded at cost. At December 31, 1997 and 1998
property and equipment consisted of the following:

[Download Table]

1997 1998
----- -----

Office and shop equipment...................................... $ 541 $ 604
Automobiles and trucks......................................... 183 168
Leasehold improvements......................................... 168 168
----- -----
892 940
Less: accumulated depreciation................................. (722) (745)
----- -----
$ 170 $ 195
===== =====

Depreciation expense was $48, $38, and $39 for the years ending December 31,
1996, 1997 and 1998, respectively.

Note 5--Line of Credit

At December 31, 1997 and 1998 the Company had an unsecured line of credit
with a commercial bank in which it may borrow the lesser of $300 or 80% of
accounts receivable. Interest is payable monthly at the prime rate plus 6.5%
with a minimum rate of 15%. The line of credit expires May 1999. At December
31, 1998, the Company had $224 outstanding under this line of credit.

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TBS INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

Note 6--Long-term Debt

Long-term debt at December 31, 1997 and 1998 consists of the following:

[Download Table]

1997 1998
---- ----

Various unsecured notes payable to former stockholders and employees
of TBS, Inc., with interest rates from 5.5% to 15% through May
1999............................................................... $155 $191
Various collateralized notes payable to a financial institution with
interest rates from 10.75% to prime plus 5% through December 2001;
collateralized by all equipment and inventory...................... 260 217
Various capital leases for shop and office equipment through October
2003............................................................... 14 46
---- ----
429 454
Less current portion.............................................. 88 54
---- ----
$341 $400
==== ====

At December 31, 1997 and 1998 the Company had unamortized deferred debt
issuance costs of $10 and $7, respectively. These amounts are being amortized
over the lives of the related debt issues.

Note 7--Retirement Savings Plan

The Company sponsors a 401(k) retirement savings plan implemented on October
1, 1997 which covers substantially all employees. The Company makes a matching
contribution equal to 20% of each employee's contribution up to 5% of their
annual salary. The Company may also elect to make additional discretionary
contributions, allocated on the basis of compensation. Employees are
immediately vested in their own contributions, if any, and are 100% vested in
the Company's matching contributions upon completion of five years of service.
Matching contributions were $0, $1 and $5 for the years ending December 31,
1996, 1997 and 1998, respectively.

Note 8--Related Party Transactions

The Company leases both branch facilities under noncancelable operating
leases with the stockholders that extend through March 2018. Certain of these
leases have renewal options. The following is a schedule of future minimum
lease payments under these leases as of December 31, 1998:

[Download Table]

1999................................................................ $ 116
2000................................................................ 116
2001................................................................ 116
2002................................................................ 116
2003 and thereafter................................................. 1,864
------
Total............................................................. $2,328
======

Aggregate payments of approximately $85, $98 and $116 were made to these
stockholders under these leases during 1996, 1997 and 1998, respectively.

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TBS INCORPORATED

NOTES TO FINANCIAL STATEMENTS--(Continued)

Note 9--Capital Leases

The Company leases telephone equipment, computers and copiers under capital
leases with third-parties with terms extending through October 2003. Certain of
these leases have renewal options. At December 31, 1998, the future minimum
rental payments required under these noncancelable leases are as follows:

[Download Table]

1999................................................................ $14
2000................................................................ 12
2001................................................................ 8
2002................................................................ 8
2003 and thereafter................................................. 8
---
Total minimum lease payments.......................................... 50
---
Less amounts representing interest.................................... 4
---
Present value of minimum lease payments............................... $46
===

Depreciation expense for third-party capital leases was approximately $9, $10
and $14 during the years ended 1996, 1997 and 1998, respectively.

Note 10--Income Taxes

As of January 1, 1997, the Company changed their corporate status from a "S"
Corporation to a "C" Corporation for federal and state income tax reporting
purposes. The Company then set up a deferred tax asset of $119 and deferred tax
liability of $17, increasing paid in capital by $115 and recognized $13 in net
income. The Company applies an asset and liability approach to accounting for
deferred income taxes. These assets and liabilities relate principally to
differing methods of depreciation, amortization of goodwill and the
disallowance of the reserve for inventory obsolescence and allowance for
doubtful accounts.

Significant components of the provision for income taxes are as follows:

[Download Table]

1997 1998
---- ----

Current expense
Federal........................................................ 49 37
State.......................................................... 13 9
--- ---
Total Current.................................................... 62 46
=== ===
Deferred expense (benefit)
Federal........................................................ 10 (29)
State.......................................................... 3 (7)
--- ---
Total Deferred................................................... 13 (36)
=== ===

Note 11--Subsequent Event

On March 1, 1999, the Company was acquired by QDSP Parts System, Inc. The
financial statements have not been effected by this transaction.

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders of
New England Truck and Auto Service, Inc.

In our opinion, the accompanying balance sheets and the related statements of
income and retained earnings, and cash flows present fairly, in all material
respects, the financial position of New England Truck and Auto Service, Inc.
(the "Company") at December 31, 1997 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PricewaterhouseCoopers LLP

September 10, 1999
Chicago, Illinois

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

BALANCE SHEETS
at December 31, 1997 and 1998
(amounts in thousands except share data)

[Download Table]

1997 1998
---- ----

ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 40 $ 36
Accounts receivable, net of allowance for doubtful accounts of $0
and $2, respectively.............................................. 105 195
Accounts receivable, related parties............................... -- 39
Inventories........................................................ 75 44
Deferred tax assets................................................ -- 2
Prepaid expenses and other assets.................................. 4 4
---- ----
Total current assets............................................. 224 320
---- ----
Property and equipment, net.......................................... 155 123
---- ----
Total assets..................................................... 379 443
==== ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion, long term debt.................................... 2 --
Short-term bank borrowing.......................................... 27 22
Accounts payable................................................... 109 75
Accrued expenses................................................... 30 82
Customer advances.................................................. 19 --
Notes payable, related parties..................................... 6 --
---- ----
Total current liabilities........................................ 193 179
---- ----
Deferred tax liability............................................. 5 8
Total liabilities................................................ 198 187
---- ----
Stockholders' equity
Capital stock ($150 par value; 100 shares authorized and
outstanding)...................................................... 15 15
Additional paid in capital......................................... 50 50
Retained earnings.................................................. 116 191
---- ----
Total stockholders' equity....................................... 181 256
---- ----
Total liabilities and stockholders' equity....................... $379 $443
==== ====

The accompanying notes are an integral part of these financial statements.

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
------ ------ ------

Sales................................................... $1,864 $1,834 $1,964
Cost of sales........................................... 1,259 1,247 1,292
------ ------ ------
Gross profit............................................ 605 587 672
Selling, general, and administrative expenses........... 574 560 533
------ ------ ------
Income from operations.................................. 31 27 139
Interest expense........................................ (14) (7) (3)
------ ------ ------
Income before income taxes.............................. 17 20 136
Provision for income taxes.............................. 7 7 61
------ ------ ------
Net income and comprehensive income..................... 10 13 75
------ ------ ------
Retained earnings, beginning of year.................... 93 103 116
------ ------ ------
Retained earnings, end of year.......................... $ 103 $ 116 $ 191
====== ====== ======

The accompanying notes are an integral part of these financial statements.

F-289

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1997 and 1998
(amounts in thousands)

[Download Table]

1996 1997 1998
---- ---- ----

Cash flows from operating activities:
Net income and comprehensive income......................... $10 $ 13 $ 75
Adjustments to reconcile net income to net cash provided
(used) in operating activities:
Depreciation.............................................. 39 47 40
Change in operating assets and liabilities:
Trade accounts receivable............................... 5 63 (90)
Accounts receivable, related parties.................... 2 47 (39)
Inventories............................................. -- (12) 31
Deferred taxes.......................................... 5 3 1
Prepaid expenses........................................ 1 (4) --
Accounts payable trade.................................. (10) (35) (34)
Accrued expenses........................................ (2) 25 33
--- ---- ----
Net cash provided by operating activities..................... 50 147 17
--- ---- ----
Cash flows from investing activities:
Purchases of property and equipment......................... (32) (47) (8)
--- ---- ----
Net cash (used) by investing activities....................... (32) (47) (8)
--- ---- ----
Cash flows from financing activities:
Payments on note payable, bank.............................. (11) (81) (7)
Payment on note payable, related parties.................... -- -- (6)
Proceeds from note payable, related parties................. 6 6 --
--- ---- ----
Net cash (used) by financing activities....................... (5) (75) (13)
--- ---- ----
Net change in cash............................................ 13 25 (4)
Cash at beginning of year..................................... 2 15 40
--- ---- ----
Cash at end of year........................................... $15 $ 40 $ 36
=== ==== ====
Supplemental disclosures of cash flow information
Cash paid for interest........................................ $ 4 $ 7 $ 14
=== ==== ====
Cash paid for income taxes.................................... $ 5 $ -- $ --
=== ==== ====

The accompanying notes are an integral part of these statements.

F-290

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)

1. Nature of Business

Nature of Business

The Company was incorporated in the State of Massachusetts in 1988, and is a
repair and service facility for trucks and automobiles. All of its sales are to
customers located in the state of Massachusetts.

2. Summary of Significant Accounting Policies

Cash and cash equivalents

Cash and equivalents represent cash and short-term, highly liquid investments
with original maturities three months or less.

Inventory

Inventory consists of minor parts and materials associated with the repair
process. Also included in inventory are materials and labor related to jobs in
process at year-end. Parts and materials are valued at the lower of cost or
market.

Deferred Income Taxes

The Company applies an asset and liability approach to accounting for income
taxes. Deferred tax liabilities and assets are recognized for the expected
future tax consequences of temporary differences between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect for the years in which the differences are expected to reverse.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization which is calculated on the double declining basis. Equipment is
depreciated over the estimated useful lives, which range from 4 to 10 years.
Leasehold improvements are depreciated over 10 years.

Use of Estimates

Revenue Recognition

Revenue is recognized when products are released to the customer and
invoiced.

F-291

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

3. Inventories

Inventories at December 31 consist of the following:

[Download Table]

1997 1998
---- ----

Parts and materials inventory...................................... $32 $17
Work in-process.................................................... 43 27
--- ---
$75 $44
=== ===

4. Property and Equipment

Property and equipment at December 31 consists of the following:

[Download Table]

1997 1998
---- ----

Machinery and equipment........................................... $477 $482
Leasehold improvements............................................ 99 100
Automobiles....................................................... 86 87
---- ----
662 669
Less: accumulated depreciation.................................... 507 546
---- ----
$155 $123
==== ====

5. Short Term Bank Borrowings

In July 1996 the Company obtained a $40 bank credit facility with the Bank of
Braintree for an operating line of credit that was renewable annually. This
line of credit was closed in February 1997. In March 1997 a new bank credit
facility was obtained from Charter Bank. The note was renewed in March 1998 and
matures in March 1999. The note bears interest at 1% plus the bank's prime
rate, 9.5% and 8.75% at December 31, 1997 and 1998 respectively. At December
31, 1997 and 1998, respectively, borrowings under the line of credit totaled
$27 and $22. The credit facility is collateralized by the Company's trade
receivables, inventory, leaseholds and equipment.

6. Long-Term Debt

The current portion of long term debt in 1997 is a note payable to the Bank
of Braintree requiring monthly payments of $347 plus interest at 10.25%. Final
payment was made in July of 1998.

7. Leases

Future minimum lease payments for non-cancelable operating leases are as
follows:

[Download Table]

Leases
------

1999.................................................................. $ 98
2000.................................................................. 98
2001.................................................................. 98
2002, and thereafter.................................................. 25
----
$319
====

F-292

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NEW ENGLAND TRUCK AND AUTO SERVICE, INC.

NOTES TO FINANCIAL STATEMENTS--(Continued)

The rental lease requires payment of property taxes and operational expenses
in addition to base periodic rentals. The lease on the York property expires in
April 2002. Total rent expense for the operating leases was $96, $120 and $109
for the years ended December 31, 1996, 1997, and 1998.

8. Related Party Transactions

At December 31, 1997, the Company had short-term notes payable to the owner
of the Company of $35. The notes are non-interest bearing and are due on
demand. Notes payable are combined with related party receivables of $29 and
$39 at December 31, 1997 and 1998 respectively. Related party receivables
include receivables from the owner as well as various employees.

The Company rented the facility at York Road, from the owner, for
approximately $8 per month (Note 7).

9. Income Taxes

The provision for income taxes for the years ended December 31, 1996, 1997
and 1998 was as follows:

[Download Table]

1996 1997 1998
---- ---- ----

Current income taxes:
Federal..................................................... $ -- $ 2 $46
State....................................................... 2 2 14
Deferred income taxes......................................... 5 3 1
---- --- ---
$ 7 $ 7 $61
==== === ===

The provision for income taxes differs from the United States statutory rate
for the years ended December 31, 1996, 1997 and 1998 for the following reasons:

[Download Table]

1996 1997 1998
---- ---- ----

Statutory tax rate............................................ $ 3 $ 3 $46
State and local taxes, net of federal benefit................. 2 2 9
Nondeductible expenses........................................ 2 2 2
Other......................................................... -- -- 4
--- --- ---
$ 7 $ 7 $61
=== === ===

Deferred tax assets (liabilities) were comprised of the following at December
31, 1997 and 1998:

[Download Table]

Gross deferred tax assets:
Accounts receivable............................................ $-- $ 1
Capital loss carryover......................................... -- 1
Other.......................................................... -- 4
---- ---
-- 2
Gross deferred tax liabilities:
Property and equipment......................................... (5) (8)
---- ---
Net deferred tax liability....................................... $ (5) $(6)
==== ===

11. Subsequent Events

On March 3, 1999, the Company was acquired by QDSP, Inc. This was accounted
for as a purchase. The financial statements have not been effected by this
transaction.

F-293

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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

HDA PARTS SYSTEM, INC.

Offer to Exchange up to $100,000,000 of its
12% Senior Subordinated Notes due 2005,
Which Have Been Registered Under the Securities Act,
for up to $100,000,000 of its Outstanding
12% Senior Subordinated Notes due 2005

----------------

PROSPECTUS

----------------

November 12, 1999

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘424B3’ Filing	Date	First	Last	Other Filings

	1/1/11	303
	1/31/09	69
	8/7/06	300
	8/1/05	6	117
	2/1/05	373
	9/30/04	76
	8/7/04	300
	3/4/04	73	160
	8/19/03	303
	12/31/02	74
	8/1/02	6	145
	6/30/02	90
	6/29/02	90
	4/1/02	355
	8/1/01	6	145
	6/30/01	90
	6/29/01	90
	10/1/00	373
	6/30/00	90		10-Q
	6/29/00	90
	5/1/00	374		10-K405/A
	2/1/00	22
	1/13/00	57
	1/2/00	57
	1/1/00	57	303
	12/31/99	56	178	10-K405, 10-K405/A
	12/14/99	1	21
	11/30/99	56
Filed on:	11/15/99
	11/12/99	1	423	S-4/A
	10/31/99	67
	10/8/99	162	290
	9/30/99	30	316	10-Q, 10-Q/A
	9/16/99	264
	9/15/99	274
	9/10/99	235	416
	9/3/99	247	396
	8/27/99	339	359
	8/26/99	162	263
	8/9/99	162
	8/1/99	6	334
	6/30/99	6	316
	6/19/99	52
	6/7/99	50	273
	5/28/99	50	196
	4/27/99	184
	4/23/99	291
	4/20/99	50	246
	4/8/99	162		S-4
	4/6/99	160
	3/31/99	135
	3/13/99	4	145
	3/12/99	163	172
	3/5/99	73	160
	3/3/99	422
	3/2/99	305	315
	3/1/99	315	415
	2/5/99	154	192
	2/1/99	69	145
	1/31/99	128	287
	1/25/99	154
	1/12/99	50	234
	1/11/99	50	183
	1/1/99	45	313
	12/31/98	10	422
	12/30/98	145	197
	12/28/98	4	145
	12/19/98	134
	12/18/98	213	385
	12/17/98	50	221
	12/12/98	222
	12/11/98	376
	11/4/98	50	212
	10/31/98	50	382
	10/30/98	147
	10/19/98	74
	10/6/98	69
	9/30/98	50	230
	8/27/98	73
	8/7/98	128	384
	8/1/98	325	334
	7/31/98	4	407
	7/28/98	110	308
	7/10/98	74
	7/8/98	140
	7/1/98	73
	6/30/98	30	158
	6/29/98	69
	6/19/98	30	171
	6/4/98	328
	6/1/98	30	140
	5/31/98	169
	5/29/98	49	146
	4/1/98	128	322
	3/31/98	129	338
	1/31/98	128	284
	1/1/98	10	401
	12/31/97	49	422
	12/27/97	181	183
	12/26/97	128	183
	12/15/97	141	228
	12/1/97	128	343
	11/30/97	128	347
	11/27/97	255
	11/17/97	190
	10/1/97	134	414
	9/30/97	131	225
	9/2/97	279
	8/8/97	379
	8/6/97	378
	3/31/97	129	338
	3/28/97	355
	1/31/97	132	284
	1/13/97	167
	1/1/97	148	415
	12/31/96	49	422
	12/27/96	128	183
	12/1/96	332
	11/30/96	128	346
	10/1/96	221
	8/1/96	334
	7/1/96	333
	6/30/96	333
	1/31/96	277
	1/1/96	138	399
	12/31/95	49
	12/29/95	175
	9/20/95	324
	3/10/95	242
	1/30/95	373
	1/1/95	230
	12/31/94	49
	12/29/94	374
	8/17/94	382
	7/2/93	19
	10/1/92	373
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Filing Submission 0000898430-99-004279 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Fleetpride Inc/AL, et al. – ‘424B3’ on 11/15/99

On: Monday, 11/15/99 · Accession #: 898430-99-4279 · File #s: 333-75887, -01, -02, -03, -04, -05, -06, -07, -08, -09, -10, -11, -12, -13, -14, -15, -16, -17, -18, -19, -20, -21, -22, -23, -24, -25, -26, -27, -28, -29, -30, -31, -32, -33, -34, -35, -36, -37, -38, -39

Prospectus — Rule 424(b)(3)Filing Table of Contents

Document Table of Contents

Dates Referenced Herein and Documents Incorporated by Reference

Prospectus — Rule 424(b)(3)
Filing Table of Contents