Exhibit 1
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Xxxxx X. Xxxxx, Xx.
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
August 3, 2000
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx, X.X.
Xxxxxxxx, Xxxxxxxx 00000
Attention: Board of Directors
AGREEMENT
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Ladies and Gentlemen:
This letter agreement (the "Agreement") sets forth our mutual understanding
regarding the purchase by me ("Buyer") of 1,700,000 shares of Common Stock of
Precision Auto Care, Inc. (the "Company") and the Buyer's employment with the
Company. The terms and conditions of the Agreement are as follows:
1. Purchase of Common Stock. Subject to the terms and conditions set forth
herein and as an inducement to Buyer to accept employment with the Company, the
Company hereby agrees to issue and sell to Buyer, and Buyer hereby agrees that
it will purchase from the Company, on August 4, 2000 (the "Closing Date"),
1,700,000 shares of Common Stock of the Company (the "Shares") for an aggregate
purchase price of $750,000 (the "Purchase Price").
2. Employment Matters. The Buyer shall be appointed the Chief Executive
officer of the Company, effective as of the Closing Date. The Buyer will serve
in that capacity at the pleasure of the Board of Directors until his successor
has been duly elected and appointed by the Company's Board of Directors. During
the first year Buyer serves as the Chief Executive Officer of the Company, the
Buyer will receive a salary of $1.00. Thereafter, the Buyer shall be entitled
to receive a base salary and other compensation as may be determined by the
Board of Directors of the Company. The Board of Directors shall appoint Buyer
to serve as a Class II director of the Company (with a term expiring at the
annual meeting of the shareholders in 2002) as soon as is reasonably practicable
following the Closing Date.
3. Representations and Warranties of the Company. The Company represents
and warrants to Buyer as follows:
(a) Corporate Existence and Power. The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia; (ii) has all requisite corporate power and authority
August 3, 2000
Page 2
to own and operate its property, to lease the property it operates as lessee and
to conduct the business in which it is currently, or is currently proposed to
be, engaged; (iii) is duly qualified as a foreign corporation, licensed and in
good standing under the laws of each jurisdiction to which its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and (iv) has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(b) Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and the transactions contemplated
hereby, including, without limitation, the sale, issuance and delivery of the
Shares, the hiring of Buyer as the Company's Chief Executive Officer and the
appointment of Buyer to the Company's Board of Directors, (i) have been duly
authorized by all necessary corporate action of the Company; (ii) do not
contravene the terms of the Articles of Incorporation or the Bylaws of the
Company; (iii) do not violate, conflict with or result in any breach or
contravention of, or the creation of any lien under, any contractual obligation
of the Company, or any requirement of law applicable to the Company; and (iv) do
not violate any judgment, injunction, writ, award, decree or order
(collectively, "Orders") of any nature of any governmental authority against, or
binding upon, the Company. The Company has not previously entered into any
contractual obligation that is currently in effect or by which it is currently
bound, granting any rights to any third party that are inconsistent with the
rights to be granted by the Company in this Agreement.
(c) Governmental Authorization; Third Party Consents. No approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any third party or governmental authority in respect of any requirement of
law is necessary or required in connection with the execution, delivery or
performance by or enforcement against the Company of this Agreement or the
transactions contemplated hereby.
(d) Binding Effect. This Agreement has been duly executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
and by general principles of equity relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).
(e) Litigation. The Company has not received notice of any Order and to the
knowledge of the Company no Order has been issued by any court or other
governmental authority against the Company purporting to enjoin or restrain the
execution, delivery or performance of any of the transactions contemplated by
this Agreement.
(f) Compliance with Laws. The Company is in compliance with all
requirements of law and all Orders issued by any court or governmental authority
in all material respects.
(g) Capitalization. On the Closing Date, after giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
August 3, 2000
Page 3
Company shall consist of 19,000,000 shares of Common Stock, of which 8,071,144
shares will be issued and outstanding, and 1,000,000 shares of Preferred Stock,
none of which will be outstanding. The Shares are duly authorized, and, when
issued to Buyer pursuant to the terms of this Agreement, will be validly issued,
fully paid and nonassessable and will be issued in compliance with the
registration and qualification requirements of all applicable securities laws.
The issued and outstanding shares of capital stock of the Company are all duly
authorized, validly issued, fully paid and nonassessable, and were issued in
compliance with the registration and qualification requirements of all
applicable securities laws.
(h) Financial Statements. The financial statements of the Company (balance
sheet and statements of operations, cash flows and shareholders' equity,
together with the notes thereto) for the fiscal year ended June 30, 1999 and the
three quarters ended March 31, 2000 (the "Financial Statements") are complete
and correct in all material respects and have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods indicated and with
each other. The Financial Statements fairly present in all material respects the
financial position, operating results and cash flows of the Company as of the
dates and for the respective periods indicated.
4. Representations/Warranties and Covenants of the Buyer. The Buyer
represents, warrants and covenants to Buyer as follows:
(a) Accredited Investor/Securities Laws. Buyer is an accredited investor
within the meaning of Securities and Exchange Commission Rule 501(a). Buyer
understands that the Shares have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), or under the laws of any other
jurisdiction and that the Company does not contemplate registering the Shares.
Buyer understands that the Shares may not be sold, transferred, pledged or
otherwise disposed of unless they are subsequently registered under the
Securities Act and, where required, under the laws of other jurisdictions or an
exemption from registration is available and the Company has received an opinion
of counsel satisfactory to the Company to that effect. Buyer is acquiring the
Shares solely for his own account, solely for investment not with a view to or
for resale, distribution or other disposition. Buyer has made no contract,
undertaking, agreement or arrangement, and has no plans to enter into any
contract, undertaking, agreement or arrangement for any resale, distribution or
disposition of the Shares. Buyer agrees that none of the Shares will be resold
in the absence of either an effective registration statement covering the Shares
under the Securities Act or an opinion of counsel satisfactory to the Company
that registration is not required under the Securities Act or under applicable
laws of any other jurisdiction.
(b) Permitted Transfers. Notwithstanding anything in this Section 4 to the
contrary, the Company acknowledges that Buyer may transfer a portion of the
Shares, with or without consideration therefor, to (1) other individuals to
induce them to join the senior management team of the Company, (2) to immediate
August 3, 2000
Page 4
family members and children of immediate family members, or entities for which
such individuals are beneficiaries, in connection with estate planning, and
Buyer shall not require a legal opinion with respect to any such transfer.
(c) Restrictive Legend. Buyer understands that the certificates
representing the Shares will bear the restrictive legend set forth below:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, under the Virginia Securities
Act, or under the securities acts of any other state or jurisdiction. No
sale, offer to sell or other transfer of these securities may be made
unless pursuant to an effective registration statement, or unless in the
opinion of counsel to the issuer the proposed disposition may be made
pursuant to a valid exemption from the registration provisions of these
Acts."
(d) The terms of this Agreement do not conflict with any agreement to which
the Buyer is a party. Without limiting the generality of the foregoing, the
Buyer is not under any obligation under the terms of a noncompetition or other
agreement that will restrict Buyer's ability to serve as Chief Executive Officer
of the Company.
5. Conditions to the Obligation of Buyer to Close. The obligation of Buyer
to purchase the Shares shall be subject to the satisfaction as determined by, or
waiver by, Buyer of the following conditions on or before the Closing Date:
(a) Refinancing. The Company shall have received the form of commitment
letter attached hereto as Exhibit A (the "Commitment Letter") duly executed by
all of the parties thereto and shall have received the sum of $2,500,000 in the
Bridge Loan financing contemplated by numbered paragraph 3 thereof.
(b) Representation and Warranties. The representations and warranties of
the Company contained in Section 2 hereof shall be true and correct in all
material respects at and on the Closing Date as if made at and on such date.
(c) Compliance with this Agreement. The Company shall have performed and
complied in all material respects with all of its agreements and conditions set
forth herein that are required to be performed or complied with by the Company
on or before the Closing Date.
(d) Bankruptcy. The Company shall not have filed a petition for bankruptcy,
reorganization or rearrangement under any federal or state bankruptcy or
insolvency laws, or any third party shall not have filed, or threatened to file,
any such involuntary petition against the Company.
(e) Foreclosure. No creditor shall have commenced any foreclosure
proceedings against any assets of the Company.
August 3, 2000
Page 5
(f) No Commitment to Issue Additional Securities. Except as set forth on
Schedule 5(f) hereto and as contemplated by the terms of the Commitment Letter,
there shall be no existing contracts, agreements or understandings obligating
the Company to issue additional equity securities in the Company.
(g) No Material Adverse Event. There shall have been no events that have
been materially adverse to the Company's business, results of operations or
financial condition.
(h) Secretary's Certificate. Buyer shall have received a certificate from
the Company, in form and substance satisfactory to Buyer, dated the Closing Date
and signed by the Secretary or an Assistant Secretary of the Company, certifying
(a) that the attached copies of the Articles of Incorporation, the Bylaws and
resolutions of the Board of Directors of the Company approving this Agreement
and the transactions contemplated hereby, are true, complete and correct and
remain unamended and in full force and effect and (b) as to the incumbency and
specimen signature of each officer of the Company executing this Agreement and
any other document delivered in connection herewith on behalf of the Company.
(i) Officer's Certificate. Buyer shall have received a certificate from the
Company, in form and substance satisfactory to Buyer, dated the Closing Date and
signed by the Chief Executive Officer of the Company, certifying (a) the
representations and warranties of the Company contained in Section 2 hereof are
true and correct in all material respects at and on the Closing Date and (b) the
Company has performed and complied in all material respects with all of the
agreements and conditions set forth or contemplated herein that are required to
be performed or complied with by the Company on or before the Closing Date.
(j) Purchased Shares. The Company shall have delivered to Buyer a
certificate in definitive form representing the Shares purchased by Buyer on the
Closing Date.
(k) Registration Rights. The Company shall have executed a registration
rights agreement with the Buyer in the form attached hereto as Exhibit B.
(l) Board Approval. The transactions contemplated by this Agreement,
including the issuance and sale of the Shares, shall have been duly approved by
the Company's Board of Directors, including a majority of the disinterested
directors.
6. Conditions to the Obligation of the Company to Close. The obligation of
the Company to issue, sell and deliver the Shares to Buyer shall be subject to
delivery by Buyer to the Company of $750,000 in immediately available funds. The
Company shall also have received the Commitment Letter duly executed by all of
the parties thereto, and received the sum of $2,500,000 in Bridge Loan financing
contemplated by numbered paragraph 3 thereof.
August 3, 2000
Page 6
7. Termination of Agreement. This Agreement may be terminated prior to the
Closing Date as follows:
(a) at any time on or prior to the Closing Date, by mutual written consent
of the Company and Buyer; or
(b) at the election of either the Company or Buyer by written notice to the
other party after 5:00 p.m., Richmond, Virginia, time on August __, 2000, if the
transactions contemplated by this Agreement shall not have been consummated
pursuant hereto unless such date is extended by the mutual written consent of
the Company and Buyer.
If this Agreement so terminates, it shall become null and void and have no
further force or effect.
8. Miscellaneous.
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(a) Survival of Representations and Warranties. All of the representations
and warranties made herein shall survive the execution and delivery of this
Agreement for a period of two years.
(b) Publicity. Buyer and Company will consult with each other before
holding any press conferences, analyst calls or other meetings or discussions
and before issuing any press releases or other public announcements or
statements regarding the transactions contemplated herein. The parties will
provide each other the reasonable opportunity to review and comment upon any
press release or other public announcement or statement with respect to the
transactions contemplated by this Agreement and shall not issue any such press
release or other public announcement or statement prior to such consultation,
except as may be required by applicable law. The parties agree that the initial
press release or releases to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed upon prior to the
issuance thereof.
(c) Notices. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
(i) if to the Company:
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx, X.X.
Xxxxxxxx, Xxxxxxxx 00000
Attention:
Facsimile:
August 3, 2000
Page 7
with a copy to:
Miles & Stockbridge P.C.
00 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Facsimile: (000) 000-0000
and
(ii) if to Buyer:
Xxxxx X. Xxxxx, Xx.
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Facsimile: 000-000-0000
with a copy to:
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
All such notices and communications shall be deemed to have been duly given
when delivered by hand, if personally delivered; when delivered by courier, if
delivered by commercial courier service; five Business Days after being
deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied.
(d) Successors and Assigns; Third Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of the parties hereto. Subject to applicable securities laws Buyer may assign
any of his continuing rights under this Agreement pursuant to transfers of a
portion of the Shares in accordance with Section 4 hereof. The Company may not
assign any of their rights under this Agreement without the written consent of
Buyer. No Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement
(e) Amendment and Waiver.
(i) No failure or delay on the part of the Company or Buyer in
exercising any right, power or remedy hereunder shall operate as a waiver
August 3, 2000
Page 8
thereof, nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to
the Company or Buyer at law, in equity or otherwise.
(ii) Any amendment, supplement or modification of or to any provision
of this Agreement, any waiver of any provision of this Agreement, and any
consent to any departure by the Company or Buyer from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by the Company and Buyer, and (ii) only in the
specific instance and for the specific purpose for which made or given.
Except where notice is specifically required by this Agreement, no notice
to or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
(f) Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement, and may be delivered to
the other parties hereto by facsimile.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
(i) Severability. If any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
(j) Rules of Construction. Unless the context otherwise requires,
references to sections or subsections refer to sections or subsections of this
Agreement.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, representations, warranties or undertakings, other than those set
forth or referred to herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
August 3, 2000
Page 9
(l) Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations or other actions by, or giving any notices
to, or making any filings with, any governmental authority or any other third
party) as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
August 3, 2000
Page 10
If you are in agreement with the foregoing, please so acknowledge by
executing the enclosed copy of this Agreement and returning it to the
undersigned by 5:00 p.m., Eastern Standard Time, on August 3, 2000.
Very truly yours,
/s/ Xxxxx X. Xxxxx, Xx.
Xxxxx X. Xxxxx, Xx.
ACCEPTED AND AGREED
as of August 4, 2000
PRECISION AUTO CARE, INC.
By: /s/ Xxxxxxx X. Xxxxx
_______________________________
Name: Xxxxxxx X. Xxxxx
Title: Chairman, Board of Directors
