RISK FACTORS

Risks Related to our Business

      The automotive repair industry in which we operate is generally highly competitive and fragmented, and the number, size and strength of our competitors varies widely from region to region. We believe that competition in the industry is based primarily on customer service, reputation, store location, name awareness and price. Our primary competitors include national and regional undercar specialty and general automotive service chains, both franchised and company-operated, car dealerships, mass merchandisers operating service centers and, to a lesser extent, gas stations and independent garages. Some of our competitors have more financial resources, are more geographically diverse and have better name recognition than we do, which might place us at a competitive disadvantage to those competitors. Because we seek to offer competitive prices, if our competitors reduce prices we may be forced to reduce our prices, which could have a material adverse effect on our business, financial condition and results of operations. We cannot assure that we or any of our stores will be able to compete effectively. If we are unable to compete successfully in new and existing markets, we may not achieve our projected revenue and profitability targets.

      Although our business is not highly seasonal, our customers typically purchase more undercar service during the period of March through October than the period of November through February, when miles driven tend to be lower. As a result, our sales and profitability tend to be lower during the latter period. In our tire division, the slowest months are typically January through April and September. Further, customers may defer or forego vehicle maintenance at any time during periods of inclement weather.

      The automotive repair industry is subject to fluctuations in the general economy. During a downturn in the economy, customers may defer or forego vehicle maintenance or repair. During periods of good economic conditions, consumers may decide to purchase new vehicles rather than having their older vehicles serviced. While the number of automobiles registered in the United States has steadily increased, this trend may not continue. In any event, should a reduction in the number of miles driven by automobile owners occur, it would likely have an adverse effect on the demand for our products and services. For example, when the retail cost of

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      We depend on close relationships with our vendors for parts and supplies and for our ability to purchase products at competitive prices and terms. Our ability to purchase at competitive prices and terms results from the volume of our purchases from these vendors. We have entered into various contracts with parts suppliers that require us to buy from them (at market prices) up to 90% of our annual purchases of specific products including brakes, exhaust, oil and ride control products. These agreements expire at various dates through November 2007.

      We believe that alternative sources exist for most of the products we sell or use at our stores, and we would not expect the loss of any one supplier to have a material adverse effect on our business, financial condition or results of operations. Our dependence on a small number of suppliers, however, subjects us to the risks of shortages and interruptions. If any of our suppliers do not perform adequately or otherwise fail to distribute parts or other supplies to our stores, our inability to replace the suppliers in a timely manner and on acceptable terms could increase our costs and could cause shortages or interruptions that could have a material adverse effect on our business, financial condition and results of operations.

      We are subject to various federal, state and local environmental laws and other governmental regulations regarding the operation of our business. For example, we are subject to rules governing the handling, storage and disposal of hazardous substances contained in some of the products such as motor oil that we sell and use at our stores, the recycling of batteries, tires and used lubricants, and the ownership and operation of real property. These laws and regulations can impose fines and criminal sanctions for violations and require the installation of pollution control equipment or operational changes to decrease the likelihood of accidental hazardous substance releases. Accordingly, we could become subject to material liabilities relating to the investigation and cleanup of contaminated properties, and to claims alleging personal injury or property damage as a result of exposure to, or release of, hazardous substances. In addition, stricter interpretation of existing laws and regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased requirements could require us to incur costs or become the basis of new or increased liabilities that could have a material adverse effect on our business, financial condition and results of operations.

      National automotive repair chains have also been the subject of investigations and reports by consumer protection agencies and the Attorneys General of various states. Publicity in connection with these investigations could have an adverse effect on our sales and, consequently, our business, financial condition and results of operations. State and local governments have also enacted numerous consumer protection laws that we must comply with.

      The costs of operating our stores may increase if there are changes in laws governing minimum hourly wages, working conditions, overtime, workers’ compensation insurance rates, unemployment tax rates or other laws and regulations. A material increase in these costs that we were unable to offset by increasing our prices or by other means would have a material adverse effect on our business, financial condition and results of operations.

      The demand for our products and services could be adversely affected by continuing developments in automotive technology. Automotive manufacturers are producing cars that last longer and require service and maintenance at less frequent intervals in certain cases. Quality improvement of manufacturers’ original equipment parts has in the past reduced, and may in the future reduce, demand for our products and services, adversely affecting our sales. For example, manufacturers’ use of stainless steel exhaust components has significantly increased the life of those parts, thereby decreasing the demand for exhaust repairs and replacements. Longer and more comprehensive warranty programs offered by automobile manufacturers and other third parties also could adversely affect the demand for our products and services. We believe that a majority of new

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      Management believes that our continued growth in sales and profit is dependent, in large part, upon our continuing ability to open/acquire and operate new stores on a profitable basis. In order to do so, we must find reasonably priced new store locations and acquisition candidates that meet our criteria and we must integrate any new stores (opened or acquired) into our system. Our growth and profitability could be adversely affected if we are unable to open or acquire new stores or if new or existing stores do not operate at a sufficient level of profitability. In addition, we generally fund our acquisitions through our existing bank credit facility. If new stores do not achieve expected levels of profitability, this may adversely impact our ability to remain in compliance with our debt covenants or to make required payments under our credit facility.

      From time to time, in the ordinary course of our business, we close certain stores, generally based on considerations of store profitability, competition, strategic factors and other considerations. Closing a store could subject us to costs including the write-down of leasehold improvements, equipment, furniture and fixtures. In addition, we could remain liable for future lease obligations.

      In order to continue to provide high quality services, we require an adequate supply of skilled field managers and technicians. Trained and experienced automotive field personnel are in high demand, and may be in short supply in some areas. We cannot assure that we will be able to attract, motivate and maintain an adequate skilled workforce necessary to operate our existing and future stores efficiently, or that labor expenses will not increase as a result of a shortage in the supply of skilled field personnel, thereby adversely impacting our financial performance. While the automotive repair industry generally operates with high field employee turnover, any material increases in employee turnover rates in our stores or any widespread employee dissatisfaction could also have a material adverse effect on our business, financial condition and results of operations.

      We currently rely on cash flow from operations and our revolving credit facility to fund our business. Amounts outstanding on the revolving credit facility are reported as debt on our balance sheet. While we believe that we have the ability to sufficiently fund our planned operations and capital expenditures for the foreseeable future, the risks to our business could result in circumstances that would materially affect our liquidity. For example, cash flows from our operations could be affected by changes in consumer spending habits, the failure to maintain favorable vendor payment terms or our inability to successfully implement sales growth initiatives, among other factors. We may be unsuccessful in securing alternative financing when needed on terms that we consider acceptable.

      In addition, a significant increase in our leverage could have important consequences to an investment in our common stock, including the following risks:

	•	our ability to obtain additional financing for working capital, capital expenditures, store renovations, acquisitions or general corporate purposes may be impaired in the future;
	•	our failure to comply with the financial and other restrictive covenants governing our debt, which, among other things, require us to maintain a minimum net worth, compliance with certain financial ratios and limit our ability to incur additional debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business, financial condition and results of operations; and

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	•	our exposure to certain financial market risks, including fluctuations in interest rates associated with bank borrowings could become more significant.

      If we do not perform in accordance with our debt covenants, the institutions providing the funds have the option to withdraw their funding support. We cannot assure that we will remain in compliance with our debt covenants in the future. In addition, our current financing agreement expires in September 2006, and we cannot assure that we will be able to refinance our existing credit facility when it expires.

      Our senior executives are important to our success because they have been instrumental in setting our strategic direction, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities and arranging necessary financing. Losing the services of any of these individuals could adversely affect our business until a suitable replacement could be found. It may be difficult to replace them quickly with executives of equal experience and capabilities. Although we have employment agreements with selected executives, we could not prevent them from terminating their employment with us. Other executives are not bound by employment agreements with us.

Risks Related to our Common Stock

      Future sales of our common stock into the public market could adversely affect our stock price and our ability to raise funds in new equity offerings.

      Sales of substantial amounts of our common stock in the public market, or the perception that future sales may occur, could result in a decline in the prevailing market price of our common stock. Future sales may also make it more difficult for us to sell equity securities or equity-related securities at a time and price that we deem appropriate.

      The vote of the holders of at least 60% of the shares of our Class C preferred stock at the time outstanding, voting as a separate class, or, alternatively, the written consent of the holders of all outstanding shares of Class C preferred stock, is needed to effect or validate any action approved by a vote of the holders of our common stock. Therefore, the holders of our Class C preferred stock have an effective veto over all matters put to a vote of our common shareholders.

      As a result of the “blocking” rights associated with our Class C preferred stock, the holders of Class C preferred stock could exert significant influence over all matters requiring shareholder approval, including the election of directors, the amendment of our certificate of incorporation and bylaws and the approval of significant corporate transactions. The interests of these shareholders may not always coincide with our interests as a company or the interests of other shareholders. Peter J. Solomon, a member of our board of directors and a principal shareholder of ours, and trusts and foundations of which he is a trustee, beneficially own all 65,000 shares of our Class C preferred stock.

      The holders of our Class C preferred stock have an effective veto right over all matters put to a vote of our common shareholders. See “— The holders of our Class C preferred stock have the right to approve all matters approved by the holders of our common stock.”

      We have provisions in our certificate of incorporation and bylaws that may make it more difficult for a third party to acquire control of us. These provisions, which are common, include:

	•	the right of our board of directors to issue preferred stock, and to determine the rights, preferences and privileges of the preferred stock, without a vote of our shareholders or other shareholder action;

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	•	the classified structure of our board of directors;
	•	the right of our board of directors to fill a vacancy created by an expansion of the Board;
	•	the right of our board of directors to alter our bylaws without shareholder approval; and
	•	the limited ability of our shareholders to call a special meeting.

      Each of these matters, as well as anti-takeover provisions contained in New York law, may discourage a third party from attempting to acquire control of us or limit the price that some investors are willing to pay for our common stock. As a result, the price of our common stock may be adversely affected.

         /s/ LAWRENCE C. DAY
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           Lawrence C. Day,
              President

         /s/ ROBERT W. AUGUST
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          Robert W. August,
              Secretary

/s/ CATHERINE D'AMICO
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Name:  Catherine D'Amico
Title:   Executive Vice
         President -- Finance,
         Chief Financial Officer and
         Treasurer

/s/ ROBERT W. AUGUST
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Name:  Robert W. August
Title:   Senior Vice
         President -- Store Support
         and Secretary

/s/ CATHERINE D'AMICO
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Catherine D'Amico
Chief Financial Officer

/s/ LOUIS RICHARDS
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            Louis Richards
            Vice President

/s/ LOUISE RICHARDS
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            Louis Richards
            Vice President

     /s/ SCHULTE ROTH & ZABEL LLP
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       Schulte Roth & Zabel LLP