Note 10 – Commitments and Contingencies

Facilities Leases

The Company’s corporate headquarters are located in Carson, California. The Company’s corporate headquarters has an initial lease term of five years through October 2016, and optional renewals through January 2020. The Company also leased a warehouse in Carson, California, under a month to month agreement, which was permanently closed on July 29, 2014, as discussed in “Note 12 – Restructuring Costs”. The Company leases warehouse space in Chesapeake, Virginia under an agreement scheduled to expire in June 2016, renewable for an additional thirty six months through June 2019. The Company’s Philippines subsidiary leases office space under a sixty-three month agreement through May 2015, renewable for an additional sixty months through April 2020. As of the date hereof, the Company has not committed to any facilities lease renewals.

Facility rent expense for the thirteen weeks ended June 28, 2014 and June 29, 2013 was $612 and $569, respectively. The Company’s facility rent expense was inclusive of amounts charged from a related party during the thirteen weeks ended June 28, 2014 and June 29, 2013 of $237 and $94, respectively. Facility rent expense for the twenty-six weeks ended June 28, 2014 and June 29, 2013 was $1,075 and $1,174, respectively. The Company’s facility rent expense was inclusive of amounts charged from a related party in connection with the Company’s Carson Warehouse during the twenty-six weeks ended June 28, 2014 and June 29, 2013 of $331 and $187, respectively.

In April 2013, the Company entered into a sale lease-back agreement with STORE Master Funding III, LLC (“STORE”) whereby we leased back our facility located in LaSalle, Illinois for our continued use as an office, retail and warehouse facility for storage, sale and distribution of automotive parts, accessories and related items for 20 years commencing upon the execution of the lease and terminating in April 2033. The related assets for the sale lease-back land and building is represented by the amount included in leased facility in Note 4 – Property and Equipment, net above. The Company’s initial base annual rent is $853 for the first year (“Base Rent Amount”), after which the rental amount will increase annually on May 1 by the lesser of 1.5% or 1.25 times the change in the Consumer Price Index as published by the U.S. Department of Labor’s Bureau of Labor Statistics, except that in no event will the adjusted annual rental amount fall below the Base Rent Amount. We were not required to pay any security deposit. Under the terms of the lease, we are required to pay all taxes and any required maintenance on the property, maintain certain levels of insurance and indemnify STORE for losses incurred that are related to our use or occupancy of the property. The lease was accounted for as a capital lease and the $376 excess of the net proceeds over the net carrying amount of the property is amortized in interest expense on a straight-line basis over the lease term of 20 years. As of June 28, 2014, the net carrying value of all capital leased assets included in property and equipment was $8,953.

The following table summarizes the future minimum lease payments under non-cancellable operating leases as of June 28, 2014 (in thousands):

Capital lease commitments as of June 28, 2014 were as follows (in thousands):

Legal Matters

Asbestos. A wholly-owned subsidiary of the Company, Automotive Specialty Accessories and Parts, Inc. and its wholly-owned subsidiary WAG, are named defendants in several lawsuits involving claims for damages caused by installation of brakes during the late 1960’s and early 1970’s that contained asbestos. WAG marketed certain brakes, but did not manufacture any brakes. WAG maintains liability insurance coverage to protect its and the Company’s assets from losses arising from the litigation and coverage is provided on an occurrence rather than a claims made basis, and the Company is not expected to incur significant out-of-pocket costs in connection with this matter that would be material to its consolidated financial statements.

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. As of the date hereof, the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position, results of operations or cash flow of the Company. The Company maintains liability insurance coverage to protect the Company’s assets from losses arising out of or involving activities associated with ongoing and normal business operations.