EXHIBIT 10.1
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
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This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of October 30, 2002, by and among
Precision Auto Care, Inc., a Virginia corporation (the "Company"), and Xxxxx X.
Xxxxx, Xx. ("Xxxxx"), Xxxxxx X. Xxxxxx ("Xxxxxx") and Desarollo Integrado, S.A.
de C.V. ("Desarollo") (the "Investors") and amends and restates that certain
Registration Rights Agreement, dated as of August 4, 2000, by and among the
Company and the Investors (the "Original Agreement").
RECITALS
X. Xxxxx purchased from the Company 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 August 4, 2000, by and among the Company and
Xxxxx (the "Letter Agreement"). Capitalized terms used but not defined herein
shall have the meaning given such terms in the Letter Agreement.
B. On January 25, 1999, the Company issued a subordinated debenture
to Xxxxxx with a principal amount of $5,000,000 plus a financing fee of $50,000
(the "Subordinated Debenture").
C. On August 3, 2000, Precision Funding, LLC ("Precision Funding"),
an entity owned by Xxxxxx and Desarollo, 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 issued to each of Xxxxxx and Desarollo warrants to
purchase 1,000,000 shares of Common Stock.
D. On August 4, 2000, the Company issued a senior debenture (the
"Senior Debenture" and, together with the Subordinated Debenture, the
"Debentures") to Precision Funding pursuant to the terms of the Credit Facility.
E. The Company, Xxxxxx and Precision Funding have entered into the
Exchange Agreement dated as of even date herewith (the "Exchange Agreement")
pursuant to which Xxxxxx and Precision Funding have agreed to exchange the
Debentures for certain equity consideration (the "Exchange Equity
Consideration"), which, in the case of Precision Funding, is contemporaneously
being distributed in equal shares to Xxxxxx and Desarollo.
F. As an inducement to enter into the Letter Agreement and the Credit
Facility, pursuant to the Original Agreement, the Company agreed to grant to the
Investors certain registration rights, all as more fully set forth herein.
G. As an inducement to enter into the Exchange Agreement, the Company
desires to amend and restate the Original Agreement to provide for certain
registration rights in connection with the Common Stock (including the Common
Stock issuable upon exercise of certain warrants) comprising the Exchange Equity
Consideration.
AGREEMENT
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.
1.1 Definitions.
(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 pursuant to the Letter
Agreement; (2) all the shares of Common Stock issued to Xxxxxx and Desarollo
upon exercise of the warrants issued in connection with the creation of the
Credit Facility; (3) all shares of Common Stock issued to Xxxxxx and Desarollo
as part of the Exchange Equity Consideration, including all shares of Common
Stock issuable upon exercise of the warrants issued as part of the Equity
Exchange Consideration; and (4) 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 (3) 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 each Investor 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.
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(f) SEC. The term "SEC" or "Commission" means the U.S.
Securities and Exchange Commission.
1.2 Demand Registration.
(a) Request by Holders. If the Company shall receive at any
time after the date hereof, a written request from any Holder or 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 Holder(s)
request to be registered and included in such registration by written notice
given by such Holder(s) 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 Holder(s) 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 1.2 and the Company shall include such information in the
written notice referred to in 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 and all securities held by
any shareholder other than a Holder 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 after the sixth anniversary of this Agreement, (2) at any time within
six months after a registration statement filed pursuant to this Section 1.2 is
declared effective by the SEC, or (3) at any time after four registration
statements filed pursuant to this Section 1.2 have been declared effective by
the SEC (provided, any registration in which Xxxxx is the sole initiating Holder
shall not count as one of
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such four registrations). 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.
(e) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 1.2, 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 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 each 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 each such
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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
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.
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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 with respect to all such requests 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; 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 (12) 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 ninety (90) days 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
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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
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 Agreement, 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 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
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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
(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;
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(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), if any;
(k) In the case of underwritten offerings, to cause its
employees and personnel to use their reasonable efforts to support the marketing
of the 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
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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 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
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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 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
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under this Section 1.8, deliver to the indemnifying party a written notice of
the commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent 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
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11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(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, and of the
Securities Act and 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.
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 (including any effected prior
to 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
(c) all officers and directors of the Company then holding Common
Stock of the Company enter into similar agreements of equal or greater duration.
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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 1.10 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. The Holders may withhold their consent (and shall not be deemed
unreasonable), if the additional rights granted by the Company are not
subordinate to the rights of the Holders hereunder in all material respects.
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 at least one-third of the Registrable Securities held by such
Investor as of the date hereof; provided, that any such assignee shall have been
assigned Registrable Securities and 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
Desarollo Integrado, S.A. de C.V.
Blvd. Xxxx Xxxxx #200
Col. Santa Xxxxx
Monterrey, N.L. CP 64650
Attn: Xxxxxxxx Xxxxxxxx
with a copy to:
Avenir Corporation
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxx
if to the Company:
Precision Auto Care, Inc.
000 Xxxxxx Xxxxx, X.X.
Xxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
or at such other ddress 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.
-15-
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.
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 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 shall be entitled to receive from any court of any
jurisdiction (in any jurisdiction) the right of specific performance without any
obligation to post bond.
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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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: _________________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: President and Chief Executive Officer
THE INVESTORS:
_____________________________________
Xxxxx X. Xxxxx, Xx.
_____________________________________
Xxxxxx X. Xxxxxx
DESAROLLO INTEGRADO, S.A. de C.V.
By: _________________________________
Name: ___________________________
Title: __________________________
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