Exhibit 2
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REGISTRATION RIGHTS AGREEMENT
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This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into
as of August 4, 2000, by and among Precision Auto Care, Inc., a Virginia
corporation (the "Company") and Xxxxx X. Xxxxx, Xx., Xxxxxx Xxxxxx and
Desarrollo Integrado, S.A. de C.V. (the "Investors").
RECITALS
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A. Xxxxx X. Xxxxx, Xx. has agreed to purchase from the Company, and the
Company has agreed to sell to Xx. Xxxxx, 1,700,000 shares of the Company's
common stock (the "Common Stock") on the terms and conditions set forth in that
certain letter agreement, dated of even date herewith, by and among the Company
and Xx. Xxxxx (the "Letter Agreement"). Capitalized terms used but not defined
herein shall have the meaning given such terms in the Letter Agreement.
B. Xxxxxx Xxxxxx and Desarrollo Integrado, S.A. de C.V. have agreed to
make available to the Company a credit facility of $11,250,000 (the "Credit
Facility") to refinance existing debt and provide for the Company's working
capital needs, and in exchange therefor, the Company will issue to each of Xx.
Xxxxxx and Dessarrollo Integrado warrants to purchase 1,000,000 shares of Common
Stock.
C. As an inducement to enter into the Letter Agreement and the Credit
Facility, the Company agreed to provides that the Investors shall be granted
certain registration rights, all as more fully set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. REGISTRATION RIGHTS.
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1.1. Definitions.
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(a) Registration. The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or ordering
of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable Securities" means: (1)
all the shares of Common Stock issued to Xxxxx X. Xxxxx, Xx. pursuant to the
Letter Agreement; (2) all the shares of Common Stock to be issued to Xxxxxx X.
Xxxxxx and Desarrollo Integrado, S.A. de C.V. upon exercise of the Warrants; and
(3) any shares of Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, all such shares of Common Stock described in clauses (1) through
(2) of this Section 1.1(b); excluding in all cases, however, any Registrable
Securities sold by a person in a transaction in which rights under this Section
1 are not assigned in accordance with this Agreement or any Registrable
Securities sold to the public pursuant to an offering registered under The
Securities Act of 1933, as amended (the "Securities Act") or sold pursuant to
Rule 144 promulgated under the Securities Act.
(c) Registrable Securities Then Outstanding. The number of shares of
"Registrable Securities then outstanding" shall mean the number of shares of
Common Stock which are Registrable Securities and (1) are then issued and
outstanding or (2) are then issuable pursuant to the exercise or conversion of
then outstanding and then exercisable options, warrants or convertible
securities.
(d) Holder. The term "Holder" means the Investors and any assignee of
record of such Registrable Securities to whom rights under this Section 1 have
been duly assigned in accordance with this Agreement.
(e) Form S-3. The term "Form S-3" means such form under the Securities Act
as is in effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities and
Exchange Commission.
1.2. Demand Registration.
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(a) Request by Holders. If the Company shall receive at any time after the
date hereof, a written request from Holders holding more than 10% of the
Registrable Securities then outstanding that the Company file a registration
statement under the Securities Act covering the resale of the Registrable
Securities pursuant to this Section 1.2, then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("Request Notice") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act and any applicable blue
sky law the resale of all Registrable Securities which Holders request to be
registered and included in such registration by written notice given by such
Holders to the Company within thirty (30) days after receipt of the Request
Notice, subject only to the limitations of this Section 1.2.
(b) Underwriting. If the Holders initiating the registration request under
this Section 1.2 ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, then they shall
so advise the Company as a part of their request made pursuant to this Section
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1.2 and the Company shall include such information in the written notice
referred to in Section 1.2(a). In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall enter into an underwriting agreement in customary form
with the managing underwriter or underwriters selected for such underwriting by
the Company and a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.2, if the underwriter(s)
advise(s) the Company in writing that marketing factors require a limitation of
the number of securities to be underwritten then the Company shall so advise all
Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of Registrable Securities that may
be included in the underwriting shall be reduced as required by the
underwriter(s) and allocated among the Holders of Registrable Securities on a
pro rata basis according to the number of Registrable Securities then
outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration shall not be
reduced unless all other securities of the Company are first entirely excluded
from the underwriting and registration. Any Registrable Securities excluded and
withdrawn from such underwriting shall be withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company shall not be
obligated to effect any registration pursuant to this Section 1.2: (1) at any
time prior to February 1, 2001, (2) at any time after the fifth anniversary of
this Agreement, (3) at any time within six months after a registration statement
filed pursuant to this Section 1.2 is declared effective by the SEC, or (4) at
any time after four registration statements filed pursuant to this Section 1.2
have been declared effective by the SEC. A registration will not count as one of
the registrations permitted under this Section 1.2 until it has been declared
effective by the SEC and unless the Holders of Registrable Securities who have
requested that some or all of their shares be registered are able to register
and sell at least 75% of the Registrable Securities requested to be included in
such registration.
(d) Deferral. Notwithstanding the foregoing, if the Company shall furnish
to Initiating Holders a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it is therefore
in the Company's best interest to defer the filing of such registration
statement, then the Company shall have the right to defer such filing for a
period of not more than 120 days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period; provided further, that upon such
deferral, the requested registration will not count as one of the registrations
permitted under this Section 1.2 until such time as such deferred registration
statement shall have been declared effective by the SEC and the shares
registered thereunder have been sold (unless .
(e) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 1.2, including without limitation all Federal and "blue
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sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders selected by Holders holding
a majority of the Registrable Securities to be included in such underwriting and
expenses of the underwriter (but excluding underwriters' discounts and
commissions and other expenses customarily borne by the underwriters and not
customarily reimbursed by the issuer or selling security holders), shall be
borne by the Company. Each Holder participating in a registration pursuant to
this Section 1.2 shall bear such Holder's proportionate share (based on the
total number of shares sold in such registration other than for the account of
the Company) of all discounts and commissions payable to underwriters in
connection with such offering. Notwithstanding the foregoing, the Company shall
not be required to pay for any expenses of any registration proceeding begun
pursuant to this Section 1.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered; provided, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 1.2.
1.3. Piggyback Registrations. The Company shall notify all Holders in
writing at least thirty (30) days prior to filing any registration statement
under the Securities Act for purposes of effecting a public offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding registration statements relating to any registration under Section 1.2
or Section 1.4 of this Agreement or to any employee benefit plan or a corporate
acquisition, merger or reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall, within fifteen (15) days after receipt of the above-
described notice from the Company, so notify the Company in writing, and in such
notice shall inform the Company of the number of Registrable Securities such
Holder wishes to include in such registration statement. If a Holder decides not
to include all of its Registrable Securities in any registration statement
thereafter filed by the Company, such Holder shall nevertheless continue to have
the right to include any Registrable Securities in any subsequent registration
statement or registration statements as may be filed by the Company with respect
to offerings of its securities, all upon the terms and conditions set forth
herein.
(a) Underwriting. If a registration statement under which the Company gives
notice under this Section 1.3 is for an underwritten offering, then the Company
shall so advise the Holders of Registrable Securities. In such event, the right
of any such Holder's Registrable Securities to be included in a registration
pursuant to this Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
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the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
Company, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis
according to the total number of Registrable Securities then requested to be
registered by each such Holder, provided, however, that the right of the
underwriters to exclude shares (including Registrable Securities) from the
registration and underwriting as described above shall be restricted so that (i)
the number of Registrable Securities included in any such registration is not
reduced below twenty-five percent (25%) of the shares included in the
registration; and (ii) all shares that are not Registrable Securities and are
held by persons who are employees or directors of the Company (or any subsidiary
of the Company) shall first be excluded from such registration and underwriting
before any Registrable Securities are so excluded. If any Holder disapproves of
the terms of any such underwriting, such Holder may elect to withdraw therefrom
by written notice to the Company and the underwriter, delivered at least ten
(10) business days prior to the effective date of the registration statement.
Any Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.
(b) Expenses. All expenses incurred in connection with a registration
pursuant to this Section 1.3 (excluding underwriters' and brokers' discounts and
commissions and other expenses customarily borne by the underwriters and not
customarily reimbursed by the issuer or selling security holders), including,
without limitation all federal and "blue sky" registration and qualification
fees, printers' and accounting fees, fees and disbursements of counsel for the
Company and reasonable fees and disbursements of counsel for the selling Holders
(selected by selling Holders holding a majority of the Registrable Securities)
shall be borne by the Company.
1.4. Form S-3 Registration. At which time as the Company becomes eligible
to use Form S-3 for the registration of its securities, in case the Company
shall receive from any Holder or Holders a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed registration and
the Holder's or Holders' request therefor, and any related qualification or
compliance, to all other Holders; and
(b) Registration. As soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within twenty (20) days after receipt of such written notice from the Company;
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provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 1.4:
(1) if Form S-3 is not available for such offering by the Holders;
provided, that the Company will use all commercially reasonable efforts to
make Form S-3 available for sale of Registrable Securities;
(2) if the Company shall furnish to the Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would
be seriously detrimental to the Company and its shareholders for such Form
S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of
not more than 120 days after receipt of the request of the Holder or
Holders under this Section 1.4;
(3) if the Company has, within the six (6) month period preceding the
date of such request, already effected a registration for the Holders
pursuant to this Agreement;
(4) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or
compliance; or
(5) if the Registrable Securities to be included in such registration
do not represent at least 10% of the Registrable Securities then
outstanding.
(c) Expenses. Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered pursuant to this Section 1.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 1.4, (excluding
underwriters' or brokers' discounts and commissions with respect to the Holders'
Registrable Securities and other expenses customarily borne by the underwriters
and not customarily reimbursed by the issuer or selling security holders),
including without limitation all filing, registration and qualification,
printers' and accounting fees and the reasonable fees and disbursements of one
counsel for the selling Holder or Holders and counsel for the Company.
(d) Not Demand Registration. Form S-3 registrations shall not be deemed to
be demand registrations as described in Section 1.2 above.
1.5. Obligations of the Company. Whenever required, upon request in
accordance with this Section 1.5, to effect the registration of any Registrable
Securities under this Agreement, the Company shall, as expeditiously as
reasonably possible:
(a) Prepare and file with the SEC a registration statement with respect to
such Registrable Securities and use all commercially reasonable efforts to cause
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such registration statement to become effective; provided, however, that, to the
extent practicable, at least five (5) Business Days prior to filing any
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the Holders of the Registrable Securities covered by
such registration statement and their counsel, copies of all such documents
proposed to be filed and any such Holder shall have the opportunity to comment
on any information pertaining solely to such Holder and its plan of distribution
that is contained therein and the Company shall make the corrections reasonably
requested by such Holder with respect to such information prior to filing any
such registration statement or amendment and, upon the request of the Holders of
a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish upon request, to each Holder of Registrable Securities to be
included in such registration and the underwriter or underwriters, if any,
without charge, at least one signed copy of the registration statement and any
post-effective amendment thereto and such number of copies of a prospectus,
including a preliminary prospectus and each prospectus filed under Rule 424
under the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by them that are
included in such registration (it being understood that the Company consents to
the use of the prospectus and any amendment or supplement thereto by each Holder
of Registrable Securities covered by such registration statement and the
underwriter or underwriters, if any, in connection with an underwritten public
offering and sale of the Registrable Securities covered by the prospectus or any
amendment or supplement thereto).
(d) Notify each Holder of the Registrable Securities to be included in such
registration and the underwriter or underwriters, if any:
(1) of any stop order or other order suspending the effectiveness of
any registration statement, issued or threatened by the SEC in connection
therewith, and take all necessary actions required to prevent the entry of
such stop order or to remove it or obtain withdrawal of it at the earliest
possible moment if entered;
(2) when such registration statement or any prospectus used in
connection therewith, or any amendment or supplement thereto, has been
filed and, with respect to such registration statement or any post-
effective amendment thereto, when the same has become effective;
(3) of any written request by the SEC for amendments or supplements to
such registration statement or prospectus; and
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(4) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue sky laws of any jurisdiction.
(e) If requested by the managing underwriter or underwriters or any Holder
of Registrable Securities to be included in such registration in connection with
any sale pursuant to a registration statement, promptly incorporate in a
prospectus supplement or post-effective amendment such information relating to
such underwriting as the managing underwriter or underwriters or such holder
reasonably requests to be included therein; and make all required filings of
such prospectus supplement or post-effective amendment as soon as practicable
after being notified of the matters incorporated in such prospectus supplement
or post-effective amendment;
(f) In connection with any sale pursuant to a registration, cooperate with
the Holders of Registrable Securities to be included in such registration and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing securities sold under such registration, and enable such securities
to be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or such holders may request;
(g) Use all commercially reasonable efforts to cause the Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities within the United States and having jurisdiction over the Company
as may be necessary to enable the seller or sellers thereof or the underwriter
or underwriters, if any, to consummate the disposition of such securities (it
being understood that the Company shall not be required to qualify to do
business or execute a general consent of service of process in any
jurisdiction);
(h) Otherwise comply with all applicable rules and regulations of the SEC,
and make generally available to its security holders (as contemplated by Section
11(a) under the Securities Act) an earnings statement satisfying the provisions
of Rule 158 under the Securities Act no later than ninety (90) days after the
end of the twelve (12) month period beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of the
registration statement, which statement shall cover said twelve (12) month
period;
(i) Provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by each registration from and after a date
not later than the effective date of such registration;
(j) Use all commercially reasonable efforts to cause all Registrable
Securities covered by each registration to be listed subject to notice of
issuance, prior to the date of first sale of such Registrable Securities
pursuant to such registration, on each securities exchange on which the Common
Stock is then listed (or is admitted to trading on Nasdaq, if the Common Stock
are then admitted to trading on Nasdaq);
(k) In the case of underwritten offerings, to cause its employees and
personnel to use their reasonable efforts to support the marketing of the
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Registrable Securities (including, without limitation, the participation in
"road shows," at the request of the underwriters or the holders of a majority of
the Registrable Securities to be included in such registration) to the extent
possible taking into account the Company's business needs and the requirements
of the marketing process (it being understood that the Company's employees other
than the Holders will not be required to devote more than five business days to
performing the obligations under this subparagraph (k));
(l) Use all commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as shall be reasonably requested by the
Holders and to otherwise comply with the securities and blue sky laws (it being
understood that the Company shall not be required to qualify to do business or
execute a general consent of service of process in any jurisdiction);
(m) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering;
(n) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing
and promptly prepare and file with the SEC and furnish to such seller or Holder
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers or prospective purchasers of such securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they are made;
(o) Furnish, at the request of any Holder requesting registration of
Registrable Securities, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities; (ii) in the case of
an underwritten offering, a "comfort" letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance
as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters; and (iii) at the time of any underwritten sale pursuant to a
registration statement, a "bring-down comfort letter" dated as of the date of
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such sale, from the Company's independent certified public accountants covering
such matters of the type customarily covered by comfort letters as the Holders
and the underwriters reasonably request.
1.6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 1.2, 1.3 or
1.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be reasonably required to
timely effect the registration of their Registrable Securities.
1.7. Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.8. Indemnification. In the event any Registrable Securities are included
in a registration statement under Sections 1.2, 1.3 or 1.4:
(a) By the Company. To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, employees, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) (or actions, litigation or investigation of
proceeding by any government agency or body in respect thereof) to which they
may become subject under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions, litigation or investigation or proceeding by any government agency or
body in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"):
(1) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto;
(2) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein
not misleading, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; or
(3) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any federal or state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange
Act or any federal or state securities law in connection with the offering
covered by such registration statement;
and the Company will reimburse each such Holder, partner, employee, officer or
director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them, as incurred, in connection with investigating or
defending any such loss, claim, damage, liability or action, investigation or
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proceeding; provided, however, that the indemnity agreement contained in this
Section 1.8(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action, investigation or proceeding if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action, investigation or
proceeding to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by such Holder,
partner, employee, officer, director, underwriter or controlling person of such
Holder. The Company shall not have any obligation to the Holders pursuant to
this Section 1.8(a) to the extent any such liability arises out of any Holder's
failure to satisfy the applicable prospectus delivery requirements in connection
with such offer and sale of Registrable Securities.
(b) By Selling Holders. To the extent permitted by law, each selling
Holder, severally and not jointly, will indemnify and hold harmless the Company,
its directors, its officers, each other person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages or liabilities (joint or several) (or actions,
litigation or investigation or proceeding by any government agency or body in
respect thereto) to which the Company or any such director, officer, controlling
person, underwriter or other such Holder, partner or director, officer or
controlling person of such other Holder may become subject under the Securities
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions, litigation or investigation or
proceeding by any governmental agency or body in respect thereto) arise out of
or are based upon (1) the failure of any Holder to deliver a prospectus in
accordance with applicable prospectus delivery requirements, or (2) any
Violation to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person, underwriter or other
Holder, partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 1.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld; and
provided, further, that the total amounts payable in indemnity by a Holder under
this Section 1.8(b) in respect of any Violation shall not exceed the net
proceeds (after deducting the underwriting discount, but before deducting
expenses) received by such Holder in the registered offering out of which such
Violation arises.
(c) Notice. Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
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indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.8.
(d) Defect Eliminated in Final Prospectus. The foregoing indemnity
agreements of the Company and Holders are subject to the condition that, insofar
as they relate to any Violation made in a preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the time the
registration statement in question becomes effective or the amended prospectus
filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any person if a copy of
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i) any
party exercising rights under this Agreement, or any controlling person of any
such party, makes a claim for indemnification pursuant to this Section 1.8, but
it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 1.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such party or any such controlling person in
circumstances for which indemnification is provided under this Section 1.8;
then, the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations; provided, however, that, in any such case, (a) no such
Holder will be required to contribute any amount in excess of the public
offering price of all such Registrable Securities offered and sold by such
Holder pursuant to such registration statement; and (b) no person or entity
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
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(f) Survival. The obligations of the Company and Holders under this Section
1.8 shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
1.9. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration or permit
use by the Company of Form S-3 for registration of the resale of the Registrable
Securities, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) File with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements);
(c) Take all other measures and file all other information, documents and
reports as shall hereafter be required by the SEC as a condition to (i) the
availability of Rule 144 under the Securities Act and (ii) the use of Form S-3;
and
(d) So long as a Holder owns any Registrable Securities, to furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
90 days after the effective date of the first registration statement filed by
the Company for an offering of its securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become subject to
the reporting requirements of the Exchange Act), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company as a Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing a Holder to sell any such securities
without registration (at any time after the Company has become subject to the
reporting requirements of the Exchange Act).
1.10. "Market Stand-Off" Agreement. Each Holder hereby agrees that it shall
not, to the extent requested by an underwriter of securities of the Company,
sell or otherwise transfer or dispose of any Registrable Securities or other
shares of stock of the Company then owned by such Holder (other than to donees
or partners of the Holder who agree to be similarly bound) for up to ninety (90)
days following the effective date of a registration statement of the Company
filed under the Securities Act; provided, however, that:
(a) such agreement shall be applicable only to the first two such
registration statements of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering after the date hereof;
(b) such agreement shall not be applicable to any Registrable Securities
sold pursuant to any registration statement in accordance with the terms of this
Agreement; and
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(c) all officers and directors of the Company then holding Common Stock of
the Company enter into similar agreements of equal or greater duration.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
1.11. Subsequent Registration Rights. From and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities then outstanding (which
consent shall not be unreasonably withheld), enter into any agreement with any
holder or prospective holder of any securities of the Company which would grant
such holder the right to request the Company to register any equity securities
of the Company, or any securities convertible into or exercisable for such
securities.
2. ASSIGNMENT AND AMENDMENT.
------------------------
2.1. Assignment of Registration Rights. Notwithstanding anything herein to
the contrary; the Holder of registration rights under this Agreement may assign
any of the foregoing rights, to (1) other individuals to induce them to join the
senior management team of the Company, (2) to immediate family members and
children of immediate family members, or entities of which such individuals are
beneficiaries, in connection with estate planning, and (3) to any other party
who acquires all and not less than all of the Registrable Securities owned by an
Investor at the time of such assignment; provided, that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 2 and
shall agree in writing to be bound by the terms and conditions of this
Agreement.
2.2. Amendment of Rights. Any provision of this Agreement may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Holders of at least 66-2/3% of Registrable
Securities. Any amendment or waiver effected in accordance with this Section 2.2
shall be binding upon the Investors and each successor or assignee of the
Investors and the Company.
3. GENERAL PROVISIONS.
------------------
3.1. Notices. Any notice, request, demand and other communication hereunder
shall be in writing and shall be deemed to have been duly given when delivered
in person, sent via a nationally recognized overnight courier or sent via
facsimile to the recipient, addressed to the party for whom intended at the
address set forth below, or such other address as may be designated by any party
hereto by notice to all the other parties in accordance with this Section, or
when actually received if sent by any other means,
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if to the Investors:
Xxxxx X. Xxxxx, Xx.
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Xxxxxx X. Xxxxxx
000 Xxxxxxx Xxxxx
Xxxxx Xxxx Xxxxx, Xxxxxxx 00000
Desarrollo Integrado, S.A. de C.V.
Blvd. Xxxx Xxxxx #200
Col. Santa Xxxxx
Monterey, N.L.C.P. 64650
Mexico
Attn: Xxxxxxxx Xxxxxxxx
if to the Company:
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx, X.X.
Xxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
or at such other address as the Investors or the Company may designate by giving
ten (10) days advance written notice to the other parties.
3.2. Entire Agreement. This Agreement, together with all the Exhibits
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
3.3. Governing Law. This Agreement shall be governed by and construed
exclusively in accordance with the internal laws of the Commonwealth of Virginia
as applied to agreements among Virginia residents entered into and to be
performed entirely within Virginia, excluding that body of law relating to
conflict of laws and choice of law.
3.4. Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, then such provision(s) shall be excluded
from this Agreement and the balance of this Agreement shall be interpreted as if
such provision(s) were so excluded and shall be enforceable in accordance with
its terms.
3.5. Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any person, other than the parties hereto and their
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.
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3.6. Successors And Assigns. Subject to the provisions of Section 2.1, the
provisions of this Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto.
3.7. Captions. The captions to sections of this Agreement have been
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
3.8. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.9. Costs And Attorneys' Fees. In the event that any action, suit or other
proceeding is instituted concerning or arising out of this Agreement or any
transaction contemplated hereunder, the prevailing party shall recover all of
such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
3.10. Adjustments for Stock Splits, Etc. Wherever in this Agreement there
is a reference to a specific number of shares of Common Stock or Preferred Stock
of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the effect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
3.11. Specific Performance. The Company and the Investors acknowledge and
agree that any violation of the terms of this Agreement would cause irreparable
harm to the non-breaching parties and that in the event of any such violation
the non-breaching parties and that in the event of any such violation the non-
breaching parties shall be entitled to receive from any court of any
jurisdiction (in any jurisdiction) the right of specific performance.
3.12. Aggregation of Stock. All shares held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
[SIGNATURE PAGE FOLLOWS]
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3.13. IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
THE COMPANY: PRECISION AUTO CARE, INC.
------------ a Virginia corporation
By: /s/ Xxxxxxx X. Xxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chairman of the Board of
Directors
THE INVESTORS:
--------------
/s/ Xxxxx X. Xxxxx, Xx.
--------------------------------------
Xxxxx X. Xxxxx, Xx.
/s/ Xxxxxx X. Xxxxxx
--------------------------------------
Xxxxxx X. Xxxxxx
Desarrollo Integrado, S.A. de C.V.
By: /s/ Xxxxxxxx Xxxxxxxx
----------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Managing Director
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