<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Precision Auto Care, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[Logo of Precision Auto Care]
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS,
MAY 25, 1999
A Special Meeting of Shareholders of Precision Auto Care, Inc. (the
"Company") will be held at the Company's headquarters located at 748 Miller
Drive, S.E., Leesburg, Virginia on May 25, 1999 at 11:00 a.m., for the
following purposes:
1. To consider approval of the issuance of Common Stock by the Company in
payment of interest and a financing fee in connection with a $5,000,000
Subordinated Debenture due May 25, 1999;
2. To consider approval of the adoption of the 1999 Employee Stock Option
and Restricted Stock Plan and the reservation of 600,000 shares of Common
Stock for issuance thereunder; and
3. To consider approval of the grant of restricted stock awards to the
non-employee members of the Company's board of directors.
Only holders of shares of Common Stock of record on the books of the Company
at the close of business on April 14, 1999 will be entitled to notice of and
to vote at the Special Meeting or any adjournment thereof.
You are cordially invited to be present at the Special Meeting. IF YOU
CANNOT ATTEND, PLEASE EXECUTE AND MAIL PROMPTLY THE ENCLOSED FORM OF PROXY,
USING THE ENCLOSED RETURN ENVELOPE.
By Order of the Board of Directors,
/s/ Eliot G. Bowytz
Eliot G. Bowytz
Secretary
748 Miller Drive, S.E
Leesburg, Virginia 20175
April 22, 1999
<PAGE>
PRECISION AUTO CARE, INC.
748 MILLER DRIVE, S.E.
LEESBURG, VIRGINIA 20175
---------------------------------------------------------
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
May 25, 1999
---------------------------------------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The following information is submitted concerning the enclosed form of proxy
and the matters to be acted upon under authority thereof at the Special
Meeting of Shareholders of the Company to be held on the 25th day of May,
1999, commencing at 11:00 a.m., or at any adjournment thereof, pursuant to the
accompanying notice of said meeting. The Special Meeting will be held at the
Company's headquarters located at 748 Miller Drive, S.E., Leesburg, Virginia
20175. The Company intends to mail this proxy statement and accompanying proxy
to all shareholders entitled to vote at the Special Meeting on or about April
22, 1999.
The Company is the result of the combination of WE JAC Corporation (the
owner of Precision Tune Auto Care) and eight other automotive maintenance
services companies in connection with the Company's November 1997 initial
public offering (the "IPO Combination"). The eight companies joined with WE
JAC Corporation were: Miracle Industries, Inc.; Lube Ventures, Inc.; Rocky
Mountain Ventures, Inc.; Rocky Mountain Ventures II, Inc.; Prema Properties,
Ltd.; Miracle Partners, Inc.; Ralston Car Wash Ltd.; and KBG, LLC. With the
IPO combination, the "Precision" family of brands was expanded to include car
wash and quick oil change and lube services. The Company acquired Worldwide
Drying Systems, Inc. shortly after the IPO Combination. In March 1998, the
Company acquired Promotora de Francquicias Praxis S.A. de C.V., previously the
holder of a master franchise agreement for Precision Tune Auto Care in Mexico
and Puerto Rico.
Solicitation and Revocability of Proxies
The proxy is solicited on behalf of the Board of Directors of the Company.
It may be revoked by the shareholder at any time prior to the exercise thereof
by filing with the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. The proxy shall be suspended if the
shareholder shall be present at the meeting and elect to vote in person.
Attendance at the meeting will not, by itself, revoke a proxy. Shares
represented by proxies received will be voted. Where the shareholder has
specified his choice with respect to the proposal to be acted upon, the shares
will be voted in accordance with the specification so made, and in the absence
thereof will be voted FOR each of the three proposals presented at the
meeting.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, certain directors, officers and regular
employees of the Company may solicit proxies by facsimile, telephone or
personal interview for which they will receive no additional compensation. In
addition, arrangements will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material for the meeting to
beneficial owners, and the Company will reimburse them for their reasonable
expenses in so doing.
Quorum and Voting Requirements
On the record date for the meeting, there were 6,120,543 shares of Common
Stock outstanding. The presence at the meeting, in person or by proxy, of
shareholders entitled to cast a majority of all votes entitled to be cast at
the meeting, is necessary to constitute a quorum for the meeting. Each
outstanding share of Common Stock is entitled to one vote on all matters.
Shareholders of record who are present at the meeting, in person or by proxy,
and those who abstain, including brokers holding shares of record for
customers who cause abstentions to be recorded at the meeting, are considered
shareholders who are present and entitled to vote and are counted for purposes
of determining if a quorum exists.
<PAGE>
Brokers holding shares of record for customers generally are not entitled to
vote on certain matters unless they receive voting instructions from their
customers. These shares for which brokers have not received voting
instructions from the beneficial owner are generally referred to as
"uninstructed shares." As used herein, "broker non-votes" means the votes that
could have been cast on the matter in question by brokers with respect to
uninstructed shares if the brokers had received their customers' instructions.
The Company will apply the principles set forth below with respect to broker
non-votes.
Quorum Requirements: Broker non-votes will not be counted for purposes of
determining whether a quorum exists. The existence of a quorum will be
determined based upon the number of shares held by shareholders present in
person plus the largest number of shares represented by proxies in which votes
have been cast or as to which authority to vote has not been withheld on any
proposal. Accordingly, if a broker has exercised discretionary authority with
respect to a proposal or has not withheld authority to vote on a proposal,
those shares may be counted as votes entitled to be cast at the meeting for
quorum purposes and the number of shares entitled to be voted for quorum
purposes will not be reduced by broker non-votes on a different proposal.
Approval of Issuance of Common Stock in Payment of Interest and Fees Due on
Subordinated Debenture: To be approved, rules applicable to issuers such as
the Company whose shares are listed on the NASDAQ Stock Market require that
the proposal receive the affirmative vote of the majority of the votes which
are cast at the meeting on this particular proposal. Uninstructed shares are
not entitled to vote on this matter and therefore broker non-votes do not
affect the outcome. Under applicable NASDAQ Stock Market votes, abstentions
are considered as votes cast and, accordingly, they have the affect of a vote
against the proposal.
Approval of the 1999 Stock Option and Restricted Stock Plan: To be approved,
rules applicable to issuers such as the Company whose shares are listed on the
NASDAQ Stock Market require that the Plan receive the affirmative vote of the
majority of the votes which are cast at the meeting on this particular
proposal. Uninstructed shares are not entitled to vote on this matter and
therefore broker non-votes do not affect the outcome. Under applicable NASDAQ
Stock Market votes, abstentions are considered as votes cast and, accordingly,
they have the affect of a vote against the proposal.
Approval of Grants of Restricted Stock Awards to Outside Directors: To be
approved, rules applicable to issuers such as the Company whose shares are
listed on the NASDAQ Stock Market require that the grants of the restricted
stock awards receive the affirmative vote of the majority of the votes which
are cast the meeting on this particular proposal. Uninstructed shares are not
entitled to vote on this matter and therefore broker non-votes do not affect
the outcome. Under applicable NASDAQ Stock Market votes, abstentions are
considered as votes cast and, accordingly, they have the affect of a vote
against the proposal.
Other Matters: Because this is a Special Meeting of shareholders, Virginia
law provides that no other business may be conducted at the meeting.
2
<PAGE>
INFORMATION WITH RESPECT TO CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders of the Company
The shareholders named in the following table are those known to the Company
to be the beneficial owners of 5% or more of the Company's Common Stock. For
purposes of this table, and as used elsewhere in this Proxy Statement, the
term "beneficial owner" means any person who, directly or indirectly, has or
shares the power to vote, or to direct the voting of a security or the power
to dispose, or to direct the disposition of, a security. Except as otherwise
indicated, the Company believes that each individual owner listed below
exercises sole voting and dispositive power over their shares.
<TABLE>
<CAPTION>
Percentage of
Amount of Beneficial Outstanding
Name and Address Ownership (shares) Common Stock
---------------- -------------------- -------------
<S> <C> <C>
SAFECO Corporation(/1/) 1,215,500 19.8%
SAFECO Plaza
Seattle, Washington 98185
Avenir Corporation(/2/) 713,000 11.65%
1725 K Street, NW,
Suite 410
Washington, D.C. 20006
William P. Stiritz(/3/) 500,000 8.17%
10401 Clayton Road,
Suite 101
St. Louis, Missouri 63131
Roberto Zambrano V. 499,799 8.17%
Mauricio Zambrano V.
David Zambrano V.
& Daniel Zambrano V.(/4/)
P.O. Box 1499
Olmito, Texas 78575
</TABLE>
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(1) As reported in Schedule 13G (Amendment No. 2) filed with the Commission on
or about February 12, 1999.
(2) As reported in Schedule 13G filed with the Commission on or about February
11, 1999.
(3) As reported on Schedule 13D filed with the Commission on December 31,
1997. Does not include 10,000 shares owned by Mr. Stiritz's son, of which
Mr. Stiritz disclaims beneficial ownership.
(4) As listed in the Company's stock transfer records. The shares are held in
the names of the listed individuals as joint tenants.
3
<PAGE>
Security Ownership of Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 1999 by: (i) each
director of the Company, (ii) each executive officer named in the table below
labeled Summary Compensation Table, and (iii) all directors and executive
officers of the Company as a group. This table is based on information
provided by the Company's directors and executive officers and the Company's
review of filings with the Securities and Exchange Commission with respect to
executive officers not currently employed with the Company. Unless otherwise
indicated in the footnotes below, and subject to community property laws where
applicable, each of the named persons exercises sole voting and dispositive
power over his or her shares.
<TABLE>
<CAPTION>
Amount of Percentage of Outstanding
Name of Beneficial Owner Beneficial Ownership Common Stock
- ------------------------ -------------------- -------------------------
<S> <C> <C>
Lynn E. Caruthers(/1/) 135,581 2.21%
John F. Ripley(/2/) 110,050 1.77
James A. Hay(/3/) 13,162 *
Arnold Janofsky(/4/) 25,058 *
Grant G. Nicolai(/5/) 25,816 *
Peter J. Kendrick 0 *
William R. Klumb(/6/) 42,263 *
Woodley A. Allen(/7/) 23,000 *
George A. Bavelis 83,817 1.44
Bernard H. Clineburg(/7/) 12,500 *
Effie L. Eliopulos 258,104 4.21
Bassam N. Ibrahim(/7/) 13,850 *
Richard O. Johnson 56,497 *
Arthur Kellar(/8/) 180,029 2.94
Harry G. Pappas, Jr.(/9/) 26,000 *
Gerald A. Zamensky(/10/) 111,298 1.82
All directors and executive of-
ficers as a group
(22 persons)(/11/)) 1,060,525 16.85
</TABLE>
- --------
*Represents less than 1%.
(1) Includes 24,500 shares held by CARFAM Associates and 77,938 shares held
by Caruthers Properties, Ltd., limited partnerships in which Ms.
Caruthers holds limited partnership interests, and options to purchase
10,000 shares which Ms. Caruthers may exercise within 60 days.
(2) Mr. Ripley resigned from the Company on October 21, 1998. His separation
agreement provides that Mr. Ripley will have until October 1999 to
exercise 93,100 of his vested options. The remainder of Mr. Ripley's
options have been terminated.
(3) Includes options to purchase 10,001 shares that are exercisable within 60
days.
(4) Includes options to purchase 21,333 shares that are exercisable within 60
days.
(5) Includes options to purchase 16,667 shares that are exercisable within 60
days.
(6) Includes options to purchase 4,167 shares that are exercisable within 60
days.
(7) Includes options to purchase 10,000 shares that are exercisable within 60
days.
(8) Includes options to purchase 35,000 shares that are exercisable within 60
days.
(9) Includes options to purchase 12,120 shares that are exercisable within 60
days.
(10) Includes 47,176 shares held by Mr. Zamensky's spouse.
(11) Includes shares beneficially owned by the executive officers named in the
Summary Compensation Table and those individuals who are executive
officers as of the date of this Proxy Statement.
4
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Compensation of Directors
Directors who are employees receive no additional compensation for serving
as directors. All non-employee directors receive fees for each meeting of the
Board of Directors they attend, $1,000 for each meeting attended in person and
$500 for each meeting attended via telephone. Non-employee directors who also
serve as members of Committees of the Board of Directors receive $200 per
committee meeting attended. In light of the Company's recent cash flow
difficulties, at the Board of Directors meeting held on October 21, 1998, the
Board decided to indefinitely suspend the payment of their compensation.
In connection with the resignation of John Moynahan as Chief Financial
Officer effective January 15, 1999, Woodley A. Allen agreed to serve as a
special financial consultant to the Company on a full-time basis until the
Company hired a new chief financial officer. Mr. Allen served in that capacity
from December 1, 1998 to January 31, 1999, the date on which the Company hired
a new chief financial officer. The Company agreed to pay Mr. Allen $10,000 per
month and granted Mr. Allen's stock options for 10,000 shares of common stock
with an exercise price of $3.625 per share as consideration for his services.
Executive Compensation
The table below sets forth the compensation earned and paid to each named
executive officer who earned $100,000 or more during the periods presented.
Amounts shown for 1996 and for a portion of 1997 represent compensation for
employment by WE JAC Corporation, the Company's predecessor. Options grants
shown for 1996, 1997 and a portion of 1998 represent grants by WE JAC
Corporation which were assumed by the Company in connection with the IPO
Combination.
Mr. Ripley resigned from the Company on October 21, 1998 and Mr. Kendrick
resigned from the Company on January 1, 1999. In connection with reorganizing
and streamlining the Company's management structure, the Company recently
determined it was appropriate to eliminate the positions occupied by James A.
Hay, Arnold Janofsky and Grant G. Nicolai. Accordingly, the employment of
Messrs. Hay, Janofsky and Nicolai will terminate effective June 2, 1999.
Information concerning Charles L. Dunlap, the Company's current President
and Chief Executive Officer and certain other current executive officers of
the Company is included below under the caption "Employment Agreements" and
"New Plan Benefits."
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Securities
Name And Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation(/1/)
- ------------------ ---- -------- -------- ------------ ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John F. Ripley 1998 $199,654 $100,000 87,762 $2,594
Former President and 1997 181,734 63,438 100,000
Chief Executive 1996 169,131 34,000 80,338
Officer(/2/)
James A. Hay 1998 117,692 $15,000 35,000 1,765
Executive Vice President
- --North America(/3/)
Arnold Janofsky 1998 127,308 3,500 1,841
Senior Vice President 1997 117,269 9,646 4,000
and General Counsel(/4/) 1996 80,385 17,500
Grant G. Nicolai 1998 117,115 7,700 25,000 1,076
Senior Vice President 1997 110,809 8,577 17,175
- --International(/5/) 1996 85,769 8,625
Peter J. Kendrick 1998 124,231 7,500 1,846
Vice President-- 1997 15,577 5,000
Finance(/6/)
</TABLE>
- --------
(1) Amounts represent the Company's matching contributions to the Company's
401(k) Savings Plan.
(2) Mr. Ripley resigned from the Company on October 21, 1998.
(3) Mr. Hay's employment with WE JAC Corporation, the Company's predecessor
commenced on July 1, 1997. The amount shown as "Other Annual Compensation"
is for the reimbursement of relocation expenses. Mr. Hay's employment with
the Company will terminate on June 2, 1999.
(4) Mr. Janofsky's employment with the Company will terminate on June 2, 1999.
(5) Mr. Nicolai's employment with the Company will terminate on June 2, 1999.
Amounts shown as "Other Annual Compensation" are for commissions on the
sale of franchises.
(6) Mr. Kendrick's employment with WE JAC Corporation, the Company's
predecessor commenced on April 21, 1997. Mr. Kendrick resigned from the
Company on January 1, 1999.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realized Value
At Assumed Annual Rates
Of Stock Price Appreci-
Ation For Option Term(/4/)
---------------------------
Number of
Securities
Underlying % Of Total Options Weighted
Options Granted To Employees Average Expiration
Name Granted(/1/) In Fiscal Year Exercise Price(/2/) Date(/3/) 5% 10%
- ---- ------------ -------------------- ------------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John F. Ripley(/5/) 268,100 33.61% $8.99 06/17/08 $ 1,520,933 $ 3,848,041
James A. Hay 40,000 5.02% $9.41 06/17/08 210,150 557,350
Arnold Janofsky 25,000 3.13% $8.64 11/12/07 150,625 367,625
Grant G. Nicolai 25,000 3.13% $8.63 11/12/07 150,875 367,875
Peter J. Kendrick(/6/) 12,500 1.57% $9.40 11/12/07 65,750 174,250
</TABLE>
- --------
(1) Stock options exercisable into 797,600 shares of Common Stock were granted
to all employees, non-employee directors of the Company and related
parties as a group during the fiscal year ended June 30, 1998. Total
includes 474,600 options granted by WE JAC Corporation and assumed by the
Company during fiscal 1998, including 193,100, 5,000, 21,500, 12,500 and
5,000 options granted by Messrs. Ripley, Hay, Janofsky, Nicolai, and
Kendrick, respectively.
(2) The exercise price is the "fair market value" of the Company's Common
Stock at the date of grant as determined in good faith by the Company's
Board of Directors or the Board of directors of WE JAC Corporation in the
case of options assumed in the IPO Combination.
(3) Date shown is expiration date of latest grant. Options generally vest and
become exercisable in annual installments of 33% of the shares covered by
each grant commencing on the first anniversary of the grant date, and
expire ten years after the grant date.
(4) The dollar amounts under the potential realizable values column use the 5%
and 10% rates of appreciation permitted by the SEC, and are not intended
to forecast actual future appreciation in the stock price. Actual gains,
if any, on stock option exercises are dependant on the future performance
of the Company's Common Stock. There can be no assurance that the amounts
reflected in this table will be achieved. The assumed rates are compounded
annually to the full ten-year term of the options.
(5) Mr. Ripley resigned from the Company on October 21, 1998. His separation
agreement provides that Mr. Ripley will have until October 1999 to
exercise 93,100 of his vesting options. The remainder of Mr. Ripley's
options have been terminated.
(6) Mr. Kendrick resigned from the Company on January 1, 1999 and Mr.
Kendrick's options have been terminated.
7
<PAGE>
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of the Unexercised In-
Number of Securities Underlying the-Money Options at June 30,
Unexercised Options at June 30, 1998 1998(/1/)
---------------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
John F. Ripley(/2/) 193,100 75,000 $ 241,805 $ 9,375
James A. Hay 1,667 38,333 0 19,375
Arnold Janofsky 12,999 12,001 18,957 12,543
Grant G. Nicolai 8,333 16,667 13,540 17,711
Peter J. Kendrick(/3/) 1,667 10,833 0 6,563
</TABLE>
- --------
(1) The closing price for the Company's Common Stock as reported by the Nasdaq
Stock Market on June 30, 1998 was $9.875. Value is calculated on the basis
of the difference between the option exercise price and $9.875, multiplied
by the number of shares of Common Stock underlying the option.
(2) Mr. Ripley resigned from the Company on October 21, 1998. His separation
agreement provides that Mr. Ripley will have until October 1999 to
exercise 93,100 of his vesting options. The remainder of Mr. Ripley's
options have been terminated.
(3) Mr. Kendrick resigned from the Company on January 1, 1999 and Mr.
Kendrick's options have been terminated.
EMPLOYMENT ARRANGEMENTS
Employment Agreements
General. Each of Messrs. Hay, Janofsky, Kendrick and Nicolai entered into
employment agreements to serve as vice presidents for a period of three years
commencing August 1, 1997. Mr. Klumb entered into an employment agreement to
serve as a vice president for a period of three years commencing November 12,
1997. The agreements provide that Messrs. Hay, Janofsky, Kendrick and Nicolai
will each receive a base salary of $120,000 per annum, Mr. Klumb will receive
a base salary of $90,000 per annum, and each of them are entitled to receive a
performance bonus under the plan developed for all of the Company's vice
presidents. Under the terms of each employment agreement, each vice president
is required to maintain the confidentiality of proprietary business or
technical information obtained during the course of employment with the
Company. Messrs. Hay, Janofsky, Kendrick and Nicolai are each prohibited from
competing with the Company in the United States during the time each is
employed by the Company and for a period of two years thereafter. Mr. Klumb is
prohibited from competing with the Company in the United States during the
time he is employed by the Company and for a period of one year thereafter.
The employment agreements provide that in the event the vice president's
employment is terminated by the Company other than for cause, or is terminated
by the vice president for good reason (e.g., following a change of control of
the Company), the vice president will be entitled to receive a severance
benefit equal to his base salary at the rate in effect at the time of
termination for 18 months, in the case of Messrs. Hay, Janofsky and Nicolai,
and for 12 months in the case for Mr. Klumb. The vice president will also be
entitled to receive any salary and benefits accrued, vested or unpaid as of
the date of termination as well as any other benefits to which the employee is
entitled under any benefit plan, policy or program maintained by the Company
in which the vice president participated. See "Severance Arrangements."
In October 1998, the Company entered into an employment agreement with
Charles L. Dunlap pursuant to which Mr. Dunlap agreed to serve as President
and Chief Executive Officer for a period of three years. The agreement also
provides that Mr. Dunlap will serve as a member of the Company's Board of
Directors. Mr. Dunlap will receive a base salary of $200,000 per annum. Under
the terms of the employment agreement, Mr. Dunlap is required to maintain the
confidentiality of proprietary business or technical information he obtains in
the course of his employment with the Company, and he is prohibited from
competing with the Company in the United States during any time he is
performing duties for the Company and for a period of two years thereafter. In
the event Mr. Dunlap's employment is terminated by the Company other than for
cause, or is terminated by
8
<PAGE>
Mr. Dunlap for good reason (e.g., following a change of control of the
Company), Mr. Dunlap will be entitled to receive a severance benefit equal to
his base salary at the rate in effect at the time of termination for the
remainder of his initial term or 18 months, whichever is greater, and will be
entitled to receive any salary and benefits accrued, vested or unpaid as of
the date of termination. In the event of such termination, Mr. Dunlap also
will be entitled to receive a pro rata portion of his performance bonus.
Mr. Dunlap was also granted stock options for 100,000 shares of the
Company's Common Stock on October 21, 1998 with an exercise price of $4.25.
The options vest in three equal installments commencing one year from the date
of grant. The options expire on October 21, 2008.
In July 1998, the Company entered into an employment agreement with William
E. Roller pursuant to which Mr. Roller agreed to serve as Senior Vice
President, Manufacturing and Distribution for a period of three years. The
agreement provides that Mr. Roller will receive a base salary of $110,000 per
annum and may also be awarded a performance bonus consistent with the
Company's performance bonus plans for all Senior Vice Presidents in the
Company. Under the terms of the employment agreement, Mr. Roller is required
to maintain the confidentiality of proprietary business or technical
information he obtains in the course of his employment with the Company, and
he is prohibited from competing with the Company in the United States during
any time he is performing duties for the Company and for a period of two years
thereafter. In the event Mr. Roller's employment is terminated by the Company
other than for cause, or is terminated by Mr. Roller for good reason (e.g.,
following a change of control of the Company), Mr. Roller will be entitled to
receive a severance benefit equal to his base salary at the rate in effect at
the time of termination for the remainder of his initial term or 18 months,
whichever is greater, and will be entitled to receive any salary and benefits
accrued, vested or unpaid as of the date of termination as well as any other
benefits to which Mr. Roller is entitled under any benefit plan, policy or
program maintained by the Company in which Mr. Roller participated.
Severance Arrangements. In October 1998, the Company entered into an
agreement with John (Jay) F. Ripley in connection with his resignation from
Precision Auto Care, Inc. Pursuant to the terms of this agreement, Mr. Ripley
will receive monthly payments of $10,000 for a period of at least one year for
serving as a special advisor to the Company. If certain conditions are met,
these monthly payments could be extended through April 2000. The Board of
Directors has extended to one year the period of time Mr. Ripley has to
exercise 93,100 of his vested stock options. If certain conditions are met,
this period could be extended through April 2000.
On January 1, 1999, Peter Kendrick resigned from the Company. In connection
with his resignation, the Company agreed to pay Mr. Kendrick $90,000 in three
monthly installments of $30,000 and to continue Mr. Kendrick's health benefits
through December 31, 1999. Mr. Kendrick's stock options were forfeited and
terminated at the time of his resignation.
In connection with reorganizing the Company in order to reduce costs and
provide for a more responsive management structure, the Company recently
eliminated the senior management positions occupied by Messrs. Hay, Janofsky
and Nicolai and their employment with the Company will be terminated effective
on or about June 2, 1999. Following the elimination of these positions,
Messrs. Hay, Janofsky and Nicolai advised the Company that they believed that
the severance benefit to which they are entitled under their respective
employment agreements is to be paid to them as a lump sum. The Company
believes that the terms of the agreements require the Company to continue to
make salary payments to the executives on a regular basis for the proscribed
period and not in the form of a lump sum payment. The Company is presently
holding discussions with these three executives concerning ways to resolve the
parties' differences.
Item 1: Approval Of Common Stock Issuance In Payment Of Interest And Fees Due
On Subordinated Debenture
On January 25, 1999, the Company borrowed $5.0 million from Arthur C.
Kellar, a director of the Company, pursuant to the terms of a Subordinated
Debenture (the "Subordinated Debenture"). Under the terms of the Subordinated
Debenture, payment of principal and interest is subordinated to all of the
Company's
9
<PAGE>
outstanding senior indebtedness, including indebtedness payable to First Union
National Bank, the Company's senior bank lender. On January 25, 1999, the
Company had approximately $18.2 million in outstanding senior indebtedness
payable to First Union National Bank.
The principal amount outstanding under the terms of the Subordinated
Debenture bears interest at the rate of 15% per annum unless the Company
defaults under the terms of the Subordinated Debenture, in which case the
interest rate increases to 17%. As an inducement for the purchase of the
Subordinated Debenture, the Company issued Mr. Kellar options to purchase
25,000 shares of the Company's common stock at an exercise price equal to
$2.00, the closing price of the Company's common stock on the date the
Subordinated Debenture was issued. The Company also agreed to pay Mr. Kellar a
financing fee at the maturity of the Subordinated Debenture in the amount of
$50,000. The issuance of the Subordinated Debenture on such terms and
conditions was approved unanimously by the Company's Board of Directors. The
Board of Directors believed that the terms of the financing were favorable to
the Company at the time, particularly in light of the Company's liquidity
position and the senior lender's requirement that the financing be subordinate
to the Company's senior indebtedness. Mr. Kellar abstained from voting with
respect to the matter.
Under the terms of the Subordinated Debenture, the $5.0 million principal
amount is due to be repaid in cash on May 25, 1999. If the Subordinated
Debenture is repaid in full on that date, interest in the amount of $250,000
and the $50,000 financing fee will also be due and payable. The Subordinated
Debenture provides that the interest and the financing fee are to be paid in
shares of the Company's common stock. The Subordinated Debenture provides that
the Company's common stock will be valued at its closing price per share on
the date immediately prior to the date on which the interest and the financing
fee is actually paid to Mr. Kellar.
Although the terms of the Subordinated Debenture require the Company to
repay the Subordinated Debenture on May 25, 1999, it is possible that the
Subordinated Debenture will not be repaid in whole or in part on that date
because the terms of the Company's credit agreement with its senior lender
require the Company to engage in certain sale and refinancing transactions
related to the Company's real estate. The proceeds of these transactions must
be applied to reduce the principal amount of loans outstanding to the senior
lender by specified dates.
The terms of the Company's credit agreement, as it has been modified
recently with its senior lender, require the Company to generate approximately
$9.0 million in proceeds from the sale of assets or financing transactions by
April 25, 1999. In order to accomplish this, the Company has been pursuing a
variety of real estate financing transactions and asset dispositions, some of
which have been completed. The Company presently expects that it will close on
the remainder of the contemplated transactions by April 25, 1999, as required
by the terms of its senior lender credit agreement. The Company's senior
lender has agreed that if the Company satisfies this requirement and is not
otherwise in default under the credit agreement, the senior lender will apply
$2.5 million of the proceeds from the final transaction to repay in part the
Subordinated Debenture on May 25, 1999. In that event, the Company would also
be entitled to pay the remaining amounts due under the Subordinated Debenture
to Mr. Kellar on the May 25, 1999 maturity date. If the Company fails to
satisfy the requirement that it generate approximately $9.0 million in
transaction proceeds by April 25, 1999 or is otherwise in default under its
bank credit agreement, the Company would not be entitled to repay the
Subordinated Debenture on May 25, 1999, without the consent of the senior
lender. Also, to the extent the Company satisfies the requirement that it
obtain $9.0 million by April 25, 1999 and is not otherwise in default under
the bank credit agreement, the Company will have to generate an additional
$2.5 million from the sale of assets or other financing transactions in order
to repay the Subordinated Debenture in full on May 25, 1999.
If the Company is unable to repay the Subordinated Debenture in whole or in
part on May 25, 1999, interest would continue to accrue on the unpaid balance
following such date at the default rate of 17% per annum. Such additional
interest will also be payable in shares of the Company's common stock valued
in the manner described above.
10
<PAGE>
Rules applicable to issuers, such as the Company, whose shares are listed on
the NASDAQ Stock Market require stockholder approval of certain issuances of
voting company stock. Under these rules, the issuance of common stock by the
Company to Mr. Kellar in payment of the interest and financing fee due under
the Subordinated Debenture is subject to the Company's prior receipt of
stockholder approval. Accordingly, the terms of the Subordinated Debenture
provide that any issuance of common stock for the purpose of paying the
interest and financing fees on the Subordinated Debenture is subject to the
Company's receipt of the approval of its shareholders. In the event that
shareholder approval is not obtained, the Company will pay the interest and
financing fees in cash. The Company believes that it is in the Company's best
interest that the Company pay the interest and financing fees in common stock
in order to conserve the Company's cash resources.
At the Special Meeting of Shareholders, the Company is seeking shareholder
approval of the issuance of common stock in order to pay the interest and fees
on the Subordinated Debenture in shares of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT ALL SHAREHOLDERS VOTE FOR APPROVAL OF
THE ISSUANCE OF COMMON STOCK IN PAYMENT OF INTEREST AND FEES DUE ON THE
SUBORDINATED DEBENTURE.
Item 2: Approval Of 1999 Employee Stock Option And Restricted Stock Plan
Subject to shareholder approval, the Board of Directors has adopted the
Precision Auto Care, Inc. 1999 Employee Stock Option and Restricted Stock Plan
(the "1999 Plan") and has authorized an aggregate of 600,000 shares of the
Company's Common Stock for issuance under the 1999 Plan. The 1999 Plan is
intended as an incentive to attract qualified individuals to join the Company
as employees as well as to retain and motivate existing employees by providing
them with the opportunity to increase their proprietary interests in the
Company. Having a personal stake in the Company increases an individual's
interest in the Company's growth and success and provides a long-range
inducement for continued employment with the Company. Attached as Appendix A
is a copy of the 1999 Plan.
At the time the 1999 Plan was adopted by the Board of Directors, 98,000
options remained available to be granted under the Company's other outstanding
stock option plans. In connection with the adoption of the 1999 Plan, the
Board of Directors determined that the Company will not issue any of those
options in the future but may reissue options under those plans to the extent
that those options which are presently outstanding under those plans are later
cancelled, expire or are otherwise terminated in accordance with the terms of
such plans. The Company presently has options to purchase 457,000 shares of
its Common Stock under those other plans.
Recent Grants
On March 31, 1999, the date on which the Plan was adopted by the Board of
Directors, the Board granted restricted share awards to each of the following
executive officers of the Company in the amounts indicated:
Charles L. Dunlap, President and Chief Executive officer (50,000 shares)
H. Clifford Harris, Chief Financial Officer (20,000 shares)
William F. Klumb, Vice President Wash Operations (10,000 shares)
William E. Roller, Senior Vice President, Manufacturing and Distribution
(20,000 shares)
John T. Wiegand, Vice President Operations (15,000 shares)
Under the terms of each grant, each of the officers' right, title and
interest in the shares which are subject to his grant will not vest until the
third anniversary of the date of grant. No portion of the restricted stock
will vest prior to the third anniversary unless the following conditions are
satisfied: If the Company's common stock closes at a price of at least $4.00
per share, 25% of the shares covered by each restricted stock award will vest
immediately. If the Company's common stock closes at a price per share of at
least $6.00 per share, 75% of the shares covered by each restricted stock
award will vest immediately. If the Company's common stock closes at a price
of $8.00 per share, all of the shares covered by each restricted stock award
will vest immediately.
11
<PAGE>
The Company also granted stock options to each of the following executive
officers in the amounts indicated:
Charles L. Dunlap, President and Chief Executive Officer (options to
purchase 100,000 shares)
William F. Klumb, Vice President Wash Operations (options to purchase
10,000 shares)
William E. Roller, Senior Vice President, Manufacturing and Distribution
(options to purchase 20,000 shares)
John T. Wiegand, Vice President Operations (options to purchase 10,000
shares)
The options are exercisable at a price of $2.375 per share, the closing
price of the Company's common stock on the date of grant, and have a term of
ten years. Under the terms of each grant, one-third of the options will vest,
to the extent that options have not vested pursuant to the acceleration
provisions described below, on each of the first three anniversaries of the
date of grant. Also, the vesting of such options may be accelerated on the
following basis: If the Company's common stock closes at a price of at least
$4.00 per share prior to the first anniversary of the date of grant, 25% of
the options will vest immediately. If the Company's common stock closes at a
price of at least $6.00 per share, 75% of the options, to the extent that
options have not previously vested, will vest immediately. If the Company's
common stock closes at a price of $8.00 per share, all of the unvested options
will vest immediately.
The grants of the restricted share awards and stock options were made
subject to the Company's receipt of shareholder approval.
Summary of the 1999 Plan
The 1999 Plan is administered by the Organization and Compensation Committee
of the Board of Directors. Six hundred thousand (600,000) shares of the
Company's Common Stock have been reserved for issuance under the 1999 Plan. No
member of the Committee and no member of the Board of Directors who is not
also an employee is eligible to participate in the 1999 Plan.
Option Grants. Options recommended by the Committee must be approved by the
Board of Directors before they may be granted. The exercise price for options
issued under the 1999 Plan shall be the fair market value at the time of the
grant. Fair market value is defined as the then current fair market value of
the Company's Common Stock as determined by reference to the selling price of
the shares on the applicable market. Options under the 1999 Plan may not be
granted after March 31, 2009. Options may extend for a period of up to 10
years from the date of grant with the actual term to be established by the
Board of Directors at the time of grant. Upon termination of an option
holder's active employment with the Company and its subsidiaries for any
reason (including illness or disability), the option and rights thereunder
shall terminate on the date of termination of employment. The Board of
Directors has the discretion in the event the option holder takes a leave of
absence from the Company and its subsidiaries for personal reasons or for
military service to take such action in respect of the option as the Board of
Directors may deem appropriate, including extending the time following
termination of active employment during which the option holder is entitled to
purchase the shares of Common Stock subject to his option. If an option
holder's employment with the Company and its subsidiaries terminates by reason
of death or retirement pursuant to normal Company policies, the retired
employee or personal representative of the deceased employee may elect to
exercise the option within ninety (90) days of the termination of the option
holder's employment. In no event may any option be exercised after the
expiration of its term. Options are nontransferable and nonassignable except
by inheritance.
The purchase price for shares of Common Stock on the exercise of options
generally may be paid either in cash, by delivering to the Company shares of
Common Stock previously owned by the option holder for at least six months
that, together with any cash tendered with the shares, will equal in value the
full purchase price, or by other "cashless" exercise methods specified in the
1999 Plan. Permitting stock-for-stock payments or other cashless exercises
allows option holders to acquire shares of Common Stock without incurring the
costs that may arise when the exercise price must be paid in cash.
12
<PAGE>
The Board of Directors has the discretion to grant either incentive stock
options or nonqualified stock options under the 1999 Plan.
Restricted Share Awards. The Committee may, in its sole discretion, issue
Common Stock as compensation for services rendered to the Company and its
subsidiaries. The Committee may subject such shares to any restrictions it
deems appropriate at the time of making the award, such as conditions relating
to performance, vesting, sale, assignment, encumbrance or other transfer. This
Common Stock is thus called "Restricted Shares." The terms, conditions and any
performance requirements of Restricted Shares will be determined by the
Committee and set forth in a written agreement executed by the Company and the
employee. The holders of Restricted Shares will have the same voting, dividend
and other rights as the Company's other stockholders. Restricted Shares may be
sold or awarded under the 1999 Plan for such consideration as the Committee
may determine, including cash, cash equivalents, full-recourse promissory
notes, past services and future services. If an award consists of newly issued
Restricted Shares, the employee must furnish consideration to the Company with
a value not less than the par value of such Restricted Shares in the form of
cash, cash equivalents or past services rendered to the Company or its
subsidiaries, as the Committee may determine.
In General. The 1999 Plan is not qualified under Section 401(a) of the
Internal Revenue Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974. The 1999 Plan contains
provisions to prevent dilution in case of stock dividends, stock splits and
changes in the structure of shares of the Common Stock. The 1999 Plan may be
amended, modified or discontinued at any time by the Board of Directors,
except that the Board does not have the power to (i) revoke or alter the terms
of any valid option or Restricted Share award previously made pursuant to the
1999 Plan, (ii) increase the number of shares of Common Stock to be reserved
for issuance and sale pursuant to options or Restricted Share awards made
pursuant to the 1999 Plan, (iii) decrease the exercise price of options
granted pursuant to the 1999 Plan, (iv) change the class of employee to whom
options or Restricted Share awards may be made pursuant to the 1999 Plan, or
(v) provide for options exercisable more than 10 years after the date granted.
Certain Tax Consequences of the 1999 Plan
The following discussion of the Federal tax consequences of the 1999 Plan is
based on the Internal Revenue Code provisions currently in effect, current
regulations thereunder, and existing administrative rulings of the Internal
Revenue Service. The discussion is limited to the tax consequences on United
States citizens and does not consider the potential impact of state tax laws.
It is not intended to be a complete discussion of all of the United States
income tax consequences of the 1999 Plan or of all the requirements that must
be satisfied to qualify for the tax treatment described in this discussion.
Changes in the law and the regulations may modify the discussion, and, in some
cases, changes may be retroactive. In addition, the tax consequences may vary
depending on the personal circumstances of individual holders of options and
Restricted Shares, and tax requirements applicable to residents of countries
other than the United States.
Options. An option holder will not recognize income upon the grant of an
option under the 1999 Plan, or at any other time prior to the exercise of the
option. Upon exercise of a nonqualified option, the option holder will
recognize compensation taxable as ordinary income in an amount equal to the
excess of the fair market value of the Common Stock on the date the option is
exercised over the option price of the Common Stock. This income is subject to
withholding and other employment taxes. The Company then will be entitled to a
deduction in a like amount for compensation paid to the option holder. The
ordinary income recognized upon exercise of the option will constitute
"personal service income" for purposes of Federal income taxes.
A subsequent taxable disposition of shares of Common Stock acquired upon
exercise of a nonqualified option and held as a capital asset will result in a
capital gain or loss measured by the difference between the fair market value
of the stock on the date the option was exercised and the amount realized on
later disposition.
An option holder will not recognize income upon the grant or exercise of an
incentive stock option under the 1999 Plan if (i) no disposition of the Common
Stock acquired pursuant to the option is made by the option
13
<PAGE>
holder within two years from the date of the granting of the option or within
one year after the transfer of such Common Stock to the option holder and (ii)
at all times during the period beginning on the date the option was granted
and ending on the day three months before the date of such exercise, the
option holder was an employee of the Company. The difference between the fair
market value of the Common Stock on the date of exercise and the option price,
however, is an item of tax preference for purposes of the alternative minimum
tax.
If an option holder who has acquired shares of Common Stock by the exercise
of an incentive stock option makes a taxable disposition of such Common Stock
after satisfying the above holding period requirements, the option holder
generally will recognize long-term capital gain or loss measured by the
difference between the option price and the selling price. In such a case, the
Company will not be entitled to any deduction for compensation paid to the
option holder.
If an option holder who has acquired shares of Common Stock by the exercise
of an incentive stock option makes a taxable disposition of such Common Stock
within two years from the date of the granting of the option or within one
year after the transfer of such Common Stock to the option holder, a
disqualifying disposition occurs. In that event the option holder recognizes
ordinary income equal to the lesser of (i) the actual gain or (ii) the
difference between the exercise price and the fair market value of the Common
Stock on the date of exercise. This income is subject to withholding and other
employment taxes. The Company will then be entitled to a deduction in like
amount for any compensation paid to the option holder. If a loss is sustained
on such a disposition, the loss will generally be treated as a capital loss.
If the amount received on the disqualifying disposition exceeds the fair
market value of the Common Stock on the date of exercise, the excess will
generally be either long- or short-term capital gain.
Restricted Shares. Restricted Share awards are subject to a vesting schedule
(or some other substantial risk of forfeiture). If a holder of Restricted
Shares separates from employment before vesting in the shares, the shares are
forfeited and revert to the Company. If the employee paid for the shares, the
purchase price will be refunded. Generally, the employee will not recognize
taxable income at the time of an award or purchase of Restricted Shares.
However, the employee may make an election under Section 83(b) of the Internal
Revenue Code ("Code") to be taxed at the time of the award.
If an election under Code 83(b) to recognize income at the time of the award
or purchase is not timely made, the employee will recognize taxable income at
the time of vesting. The taxable income will be equal to the excess of the
fair market value of the Restricted Shares at the time the shares vest over
the amount (if any) that the employee paid for the Restricted Shares.
If an employee receives or purchases Restricted Shares that remain subject
to vesting, the employee may elect under Code 83(b) to include as ordinary
income in the year of the award or purchase an amount equal to the excess of
(a) the fair market value of the shares on the transfer date over (b) the
purchase price (if any) paid for the shares. The fair market value of the
Restricted Shares will be determined as if the shares were not subject to
forfeiture. If the employee makes the Code 83(b) election, the employee will
not recognize any additional income when the shares vest. Any appreciation in
the value of the Restricted Shares after the award or purchase is not taxed as
compensation but instead is taxed as capital gain when Restricted Shares are
sold or transferred.
If an employee makes a Section 83(b) election and the Restricted Shares are
later forfeited, the holder is not entitled to a tax deduction or a refund of
the tax already paid.
Income that is characterized as compensation income, whether as a result of
vesting in the Restricted Shares or in connection with a Code 83(b) election,
will be subject to withholding and other employment taxes. The Company will be
entitled to a deduction in like amount, and in the same tax year, for any
compensation income reportable by the holder of Restricted Shares.
Dividends received by a holder of Restricted Shares on unvested Restricted
Shares are treated as taxable compensation and are subject to withholding if
the holder is an employee or former employee. The Company is
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<PAGE>
entitled to a deduction equal to the amount of the dividends paid on unvested
restricted shares. Dividends received on Restricted Shares subject to a Code
83(b) election are taxed as dividends instead of compensation.
Approval of the adoption of the 1999 Plan and the reservation of 600,000
shares of Common Stock for issuance under the 1999 Plan is subject to the
affirmative vote of the holders of a majority of voting power of the Company
Common Stock present in person or represented by proxy at the Special Meeting.
THE BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION OF THE PLAN AND THE
RESERVATION OF SIX HUNDRED THOUSAND SHARES OF COMMON STOCK FOR ISSUANCE UNDER
THE PLAN.
Item 3. Approval of the Grant of Restricted Stock Awards to the Non-employee
Members of the Company's Board of Directors
As noted above in the portion of this Proxy Statement relating to the
compensation of the Company's directors, on October 21, 1998 the Company's
Board of Directors determined it was appropriate to suspend the payment of
cash director fees in light of the Company's need for liquidity. At a meeting
held on March 31, 1999, the Board of Directors unanimously approved the grant
of restricted stock awards to each of the members of the Company's Board of
Directors who is not also an employee of the Company, subject to the approval
of the Company's stockholders.
These restricted stock awards were made in order to provide the outside
board members with appropriate compensation in lieu of their cash fees through
the June 30, 1999 end of the Company's fiscal year. The Company believes that
the restricted stock awards are particularly appropriate, given the number of
board and committee meetings the directors have attended and the amount of
time board members have devoted to the Company's affairs during the past seven
months. Accordingly, at the March 31, 1999 board of directors meeting, each of
Woodley A. Allen, George Bavelis, Lynn Caruthers, Bernard Clineburg, Bassam
Ibrahim, Richard Johnson, Arthur Kellar, Harry G. Pappas, Jr. and Gerald
Zamensky was granted a restricted stock award covering 5,000 shares of the
Company common stock.
Under the terms of each grant, each of the outside director's right, title
and interest to the 5,000 shares which are the subject of his or her grant
will not vest until the third anniversary of the date of grant. No portion of
the restricted stock award will vest prior to the third anniversary unless the
following conditions are satisfied: If the Company's common stock closes at a
price of at least $4.00 per share, 25% of the shares covered by each
restricted stock award will vest immediately. If the Company's common stock
closes at a price of at least $6.00 per share, 75% of the shares covered by
each restricted stock award will vest immediately. If the Company's common
stock closes at a price of $8.00 per share, all of the shares covered by each
restricted stock award will vest immediately.
The Board of Directors awarded the restricted stock grants subject to the
Company's receipt of shareholder approval. Rules applicable to issuers, such
as the Company, whose shares are listed on the Nasdaq Stock Market, require
stockholder approval of certain issuances of voting common stock. Under these
rules, the issuance of common stock by the Company to the directors in the
form of these restricted stock awards is subject to stockholder approval.
At the Special Meeting of Shareholders, the Company is seeking approval of
the grants to each of the outside directors of the restricted stock awards
described above and the reservation of 45,000 shares of the Company's common
stock to be issued thereunder.
THE BOARD OF DIRECTORS RECOMMENDS THAT ALL SHAREHOLDERS VOTE FOR APPROVAL OF
THE GRANT OF THE RESTRICTED STOCK AWARDS TO THE COMPANY'S NON-EMPLOYEE
DIRECTORS.
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<PAGE>
NEW PLAN BENEFITS
Set forth in the table below are benefits or amounts that would be received
by or allocated to the persons and groups referenced for each of the 1999 Plan
and the restricted stock awards being granted to outside directors. None of
the benefits or amounts that actually will be received are determinable at
this time.
<TABLE>
<CAPTION>
Outside
Director Restricted
1999 Plan Stock Awards
--------------- ------------------------
Dollar Value Of Dollar Value
Restricted Restricted Stock Restricted Of Restricted
Name And Position Shares(/1/) Shares(/2/) Options(/1/) Shares Shares(/2/)
- ----------------- ----------- --------------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Charles Dunlap 50,000 $118,750 100,000 0 0
President and
Chief Executive Officer
H. Clifford Harris 20,000 $ 47,500 0 0 0
Chief Financial Officer
William F. Klumb 10,000 $ 23,750 10,000 0 0
Vice President, Wash Op-
erations
William E. Roller 20,000 $ 47,500 20,000 0 0
Senior Vice President,
Manufacturing and Dis-
tribution
John T. Wiegand 15,000 $ 35,625 10,000 0 0
Vice President, Opera-
tions
Woodley A. Allen, Direc-
tor 0 0 0 5,000 $ 11,875
George Bavelis, Director 0 0 0 5,000 $ 11,875
Lynn Caruthers, Director 0 0 0 5,000 $ 11,875
Bernard Clineburg, Di-
rector 0 0 0 5,000
Bassam Ibrahim, Director 0 0 0 5,000 $ 11,875
Richard Johnson, Direc-
tor 0 0 0 5,000 $ 11,875
Arthur Kellar, Director 0 0 0 5,000 $ 11,875
Harry G. Pappas, Jr.,
Director 0 0 0 5,000 $ 11,875
Gerald Zamensky, Direc-
tor 0 0 0 5,000 $ 11,875
Executive Group(3) 125,000 $296,875 187,500 0 0
Non-Executive Director
Group 0 0 0 45,000 $106,875
Non-Executive Officer
Employee Group 0 0 140,625 0 0
</TABLE>
- --------
(1) The selection of participants under the 1999 Plan and the number of shares
of Common Stock subject to options and restricted shares granted and
awarded thereunder are at the discretion of the Company's Organization and
Compensation Committee. The number of options and restricted shares
included in the table is the number the Board of Directors granted at the
time the 1999 Plan was adopted.
(2) The dollar value is based upon the $2.375 closing price of the Company's
stock on March 31, 1999, the date on which the plan or arrangement was
adopted. The actual dollar amounts will depend upon the value of the
Company's common stock at the time shares subject to each award vest.
(3) The Executive Group consists of those individuals who are executive
officers as of the date of this Proxy Statement.
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<PAGE>
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for the Company's 1999
Annual Meeting of Shareholders, it must be received by the Company at its
offices no later than July 19, 1999. All such shareholder proposals should be
mailed to the Company's headquarters and addressed to the attention of Eliot
G. Bowytz, Secretary. To be eligible for inclusion in next year's proxy
material, such proposals must conform to the requirements set forth in
Regulation 14A under the Securities Exchange Act of 1934, as amended. In order
to be considered at an Annual Meeting, a shareholder proposal must be
presented by the proponents or their representatives in attendance at the
meeting.
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<PAGE>
APPENDIX A
PRECISION AUTO CARE, INC. 1999 EMPLOYEE
STOCK OPTION AND RESTRICTED STOCK PLAN
<PAGE>
APPENDIX A
PRECISION AUTO CARE, INC. 1999 EMPLOYEE
STOCK OPTION AND RESTRICTED STOCK PLAN
1. PURPOSE
The proper execution of the duties and responsibilities of the executives
and key employees of Precision Auto Care, Inc. (the "Corporation") and its
subsidiaries is a vital factor in the continued growth and success of the
Corporation. Toward this end, it is necessary to attract and retain effective
and capable individuals to assume positions that contribute materially to the
successful operation of the business of the Corporation and its subsidiaries.
It will benefit the Corporation, therefore, to bind the interests of these
persons more closely to its own interests by offering them an attractive
opportunity to acquire a proprietary interest in the Corporation and thereby
provide them with added incentive to remain in the service of the Corporation
and its subsidiaries and to increase the prosperity, growth, and earnings of
the Corporation. This stock option and restricted stock plan is intended to
serve these purposes.
2. DEFINITIONS
The following terms wherever used herein shall have the meanings set forth
below.
(a) The term "Award" means award of an Option or a Restricted Share under
the Plan.
(b) The term "Board of Directors" shall mean the Board of Directors of the
Corporation.
(c) The term "Change in Control of the Corporation" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of the Regulation 14A promulgated under the Exchange Act,
whether or not the Corporation is in fact required to comply therewith,
provided that, without limitation, such a change in control shall be deemed to
have occurred if (A) any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or any of its
subsidiaries or a corporation owned, directly or indirectly, by the
stockholders of the Corporation in substantially the same proportions as the
ownership of Common Stock of the Corporation, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities; (B)
during any period of two consecutive years (not including any period prior to
the adoption of the Plan), individuals who at the beginning of such period
constitute the Board and any new director (other than a director designated by
a person who has entered into an agreement with the Corporation to effect a
transaction described in clauses (A) or (D) of this definition) whose election
by the Board or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; (C) the Corporation enters into
an agreement, the consummation of which would result in the occurrence of a
Change in Control of the Corporation; or (D) the stockholders of the
Corporation approve a merger, share exchange or consolidation of the
Corporation with any other corporation, other than a merger, share exchange or
consolidation that would result in the voting securities of the Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the combined voting power of the voting
securities of the Corporation of such surviving entity outstanding immediately
after such merger, share exchange or consolidation, or the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale of disposition by the Corporation of all or
substantially all the Corporation's assets.
(d) The term "Code" shall mean the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder.
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(e) The term "Committee" shall mean a committee to be appointed by the Board
of Directors to consist of three or more members, all of whom are members of
the Board of Directors.
(f) The term "Common Stock" shall mean the shares of common stock, par value
$0.01 per share, of the Corporation.
(g) The term "Corporation" shall mean Precision Auto Care, Inc., a Virginia
corporation.
(h) The term "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(i) The term "Fair Market Value" of the Common Stock shall be (a) the
average on the applicable date of the high and low prices of a share of Common
Stock on the principal national securities exchange on which shares of Common
Stock are then trading, or, if shares were not traded on such date, then on
the next preceding date on which a trade occurred; or (b) if Common Stock is
not traded on a national securities exchange but is quoted on the National
Association of Securities Dealers, Inc. Authorized Quotation System ("NASDAQ")
or a successor quotation system, the last reported sale price on such date as
reported by NASDAQ or such successor quotation system; or (c) if Common Stock
is not traded on a national securities exchange and is not reported in NASDAQ
or a successor quotation system, the closing bid price (or average bid prices)
last quoted on such date by an established quotation service for over-the-
counter securities; or (d) if Common Stock is not traded on a national
securities exchange, is not reported on NASDAQ or a successor quotation system
and is not otherwise publicly traded on such date, the fair market value of a
share of Common Stock as established by the Board acting in good faith and
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale or offer prices for the Common Stock in
private arm's-length transactions. During periods when the Fair Market Value
of a share of Common Stock cannot be determined under any of the methods
specified in clauses (a), (b) and (c), above, the Committee shall have the
authority to establish the Fair Market Value of the Common Stock as of the
beginning of (or periodically during) each fiscal year of the Company and to
use such value for all transactions occurring thereafter within such fiscal
year.
(j) The term "Incentive Stock Option" shall mean any Option granted pursuant
to the Plan that is designated as an Incentive Stock Option and which
satisfies the requirements of Section 422(b) of the Code.
(k) The term "Nonqualified Stock Option" shall mean any Option granted
pursuant to the Plan that is not an Incentive Stock Option.
(l) The term "Option" or "Stock Option" shall mean a right granted pursuant
to the Plan to purchase shares of Common Stock.
(m) The term "Option Agreement" shall mean the written agreement
representing Options granted pursuant to the Plan as contemplated by Paragraph
7 of the Plan.
(n) The term "Plan" shall mean the Precision Auto Care, Inc. 1999 Employee
Stock Option and Restricted Stock Plan as originally approved by the Board of
Directors on March 31, 1999, as the same may be amended from time to time.
(o) The term "Restricted Share" means a share of Common Stock awarded under
the Plan.
(p) The term "Restricted Stock Agreement" means the agreement between the
Corporation and the recipient of a Restricted Share that contains the terms,
conditions and restrictions pertaining to such Restricted Share.
(q) The term "subsidiary" or "subsidiaries" shall mean a corporation of
which capital stock possessing 50% or more of the total combined voting power
of all classes of its capital stock entitled to vote generally in the election
of directors is owned in the aggregate by the Corporation directly or
indirectly through one or more subsidiaries.
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3. EFFECTIVE DATE OF THE PLAN
The Plan shall become effective upon stockholder approval, provided that
such approval is received before the expiration of one year from the date the
Plan is approved by the Board of Directors, and provided further that the
Board of Directors may grant Options or award Restricted Shares pursuant to
the Plan prior to stockholder approval if the grant of such Options or the
award of such Restricted Shares by their terms are contingent upon subsequent
stockholder approval of the Plan.
4. ADMINISTRATION
(a) The Plan shall be administered by the Committee.
(b) The Committee may establish, from time to time and at any time, subject
to the approval of the Board of Directors and subject to the limitations of
the Plan as set forth herein, such rules and regulations and amendments and
supplements thereto, as it deems necessary to comply with applicable law and
regulation and for the proper administration of the Plan. A majority of the
members of the Committee shall constitute a quorum. The vote of a majority of
a quorum shall constitute action by the Committee.
(c) The Committee shall from time to time submit to the Board of Directors
for its approval the names of those key employees who, in its opinion, should
receive Awards, and shall recommend the numbers of shares on which Awards
should be granted to each such person and the nature of the Awards to be
granted.
(d) Awards shall be granted by the Corporation and shall become effective
only after prior approval of the Board of Directors, and upon the execution of
an Option Agreement or a Restricted Stock Agreement, as applicable, between
the Corporation and the recipient of the Award.
(e) The Committee's interpretation and construction of the provisions of the
Plan and the rules and regulations adopted by the Committee shall be final,
unless otherwise determined by the Board of Directors. No member of the
Committee or the Board of Directors shall be liable for any action taken or
determination made, in respect of the Plan, in good faith.
5. PARTICIPATION IN THE PLAN
(a) Participation in the Plan shall be limited to the executives and key
employees of the Corporation and its subsidiaries who shall be designated by
the Committee and approved by the Board of Directors.
(b) No member of the Board of Directors who is not also an employee of the
Corporation shall be eligible to participate in the Plan.
6. STOCK SUBJECT TO THE PLAN
(a) There shall be reserved for the granting of Awards pursuant to the Plan,
and for issuance and sale pursuant to such Awards, six hundred thousand
(600,000) shares of Common Stock. To determine the number of shares of Common
Stock available at any time for the granting of Awards, there shall be
deducted from the total number of reserved shares of Common Stock, the number
of shares of Common Stock in respect of which Awards have been made pursuant
to the Plan that are still outstanding or have been exercised. The shares of
Common Stock to be issued in connection with Awards made pursuant to the Plan
shall be made available from the authorized and unissued shares of Common
Stock. If for any reason shares of Common Stock as to which an Award has been
made are forfeited or otherwise cease to be subject to purchase thereunder,
then such shares of Common Stock again shall be available for issuance in
connection with Awards made pursuant to the Plan.
(b) In the event of reorganization, recapitalization, stock split, stock
dividend, combination of shares of Common Stock, merger, consolidation, share
exchange, acquisition of property or stock, or any change in the capital
structure of the Corporation, the Committee shall make such adjustments as may
be appropriate, in its
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discretion, in the number and kind of shares reserved for Awards and in the
number, kind and price of shares covered by Awards made pursuant to the Plan.
7. TERMS AND CONDITIONS OF OPTIONS
(a) Each Option granted pursuant to the Plan shall be evidenced by an Option
Agreement in such form as the Committee from time to time may determine.
(b) The exercise price per share for Options shall be established by the
Board of Directors upon the recommendation of the Committee at the time of the
grant of Options pursuant to the Plan and shall not be less than the Fair
Market Value of a share of Common Stock on the date on which the Option is
granted. If the Board of Directors does not establish a specific exercise
price per share at the time of grant, the exercise price per share shall be
equal to the Fair Market Value of a share of Common Stock on the date of grant
of the Option.
(c) Each Option, subject to the other limitations set forth in the Plan, may
extend for a period of up to 10 years from the date on which it is granted.
The term of each Option shall be determined by the Board of Directors at the
time of grant of the Option, provided that if no term is established by the
Board of Directors, the term of the Option shall be 10 years from the date on
which it is granted.
(d) The Board of Directors, upon recommendation of the Committee, may
provide in the Option Agreement that the right to exercise each Option for the
number of shares subject to each Option shall vest in the Option holder over
such period of time as the Committee, in its discretion, shall determine for
each Option holder. If the Committee does not designate a vesting schedule,
the Option granted to the Option holder shall not be exercisable until three
years after the date of grant, at which time the Option will be fully
exercisable. Notwithstanding the foregoing, each Option Agreement shall
provide that upon the occurrence of a Change in Control of the Corporation,
all Options then outstanding shall become immediately exercisable; except that
(i) in the case of an Incentive Stock Option, the acceleration of
exercisability shall not occur without the Optionee's written consent; and
(ii) if the Corporation and the other party to the transaction constituting a
Change in Control of the Corporation agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes, and if
such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Corporation's
independent accountants and such other party's independent accountants each
determine in good faith that such acceleration would preclude the use of
"pooling of interests" accounting.
(e) Options shall be nontransferable and nonassignable, except that Options
may be transferred by testamentary instrument or by the laws of descent and
distribution.
(f) Upon voluntary or involuntary termination of an Option holder's active
employment for any reason (including illness or disability), his Option and
all rights thereunder shall terminate effective at the close of business on
the date the Option holder ceases to be an active, regular employee of the
Corporation or any of its subsidiaries, except (i) to the extent previously
exercised and (ii) as provided in subparagraphs (g), (h) and (i) of this
Paragraph 7.
(g) In the event an Option holder (i) takes a leave of absence from the
Corporation or any of its subsidiaries for personal reasons or as a result of
entry into the armed forces of the United States, or any of the departments or
agencies of the United States government or (ii) terminate his employment or
ceases providing services to the Corporation and any of its subsidiaries, by
reason of illness, disability, voluntary termination with the consent of the
Committee, or other special circumstances, the Committee may consider his case
and may take such action in respect of the related Option Agreement as it may
deem appropriate under the circumstances, including accelerating the time
previously granted Options may be exercised and extending the time following
the Option holder's termination of active employment during which the Option
holder is entitled to purchase the shares of Common Stock subject to such
Options, provided that in no event may any Option be exercised after the
expiration of the term of the Option.
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(h) If an Option holder dies during the term of his Option without having
fully exercised his Option, the executor or administrator of his estate or the
person who inherits the right to exercise the Option by bequest or inheritance
shall have the right within ninety (90) days of the Option holder's death to
purchase the number of shares of Common Stock that the deceased Option holder
was entitled to purchase at the date of his death, after which the Option
shall lapse, provided that in no event may any Option be exercised after the
expiration of the term of the Option.
(i) If an Option holder terminates employment without his having fully
exercised his Option due to his retirement with the consent of the
Corporation, then such Option holder shall have the right within ninety (90)
days of the Option holder's termination of employment to purchase the number
of shares of Common Stock that the Option holder was entitled to purchase at
the date of his termination, after which the Option shall lapse, provided that
in no event may any Option be exercised after the expiration of the term of
the Option. The Committee may cancel an Option during the ninety-day period
referred to in this paragraph, if the Participant engages in employment or
activities contrary, in the opinion of the Committee, to the best interests of
the Corporation. The Committee shall determine in each case whether a
termination of employment shall be considered a retirement with the consent of
the Corporation, and, subject to applicable law, whether a leave of absence
shall constitute a termination of employment. Any such determination of the
Committee shall be final and conclusive, unless overruled by the Board.
(j) The granting of an Option pursuant to the Plan shall not constitute or
be evidence of any agreement or understanding, express or implied, on the part
of the Corporation or to retain or employ the Option holder for any specified
period.
(k) In addition to the general terms and conditions set forth in this
Paragraph 7 in respect of Options granted pursuant to the Plan, Incentive
Stock Options granted pursuant to the Plan shall be subject to the following
additional terms and conditions:
(i) "Incentive stock options" shall be granted only to individuals who,
at the date of grant of the Option, are regular, full-time employees of the
Corporation or any of its subsidiaries;
(ii) No employee who owns beneficially more than 10% of the total
combined voting power of all classes of stock of the Corporation shall be
eligible to be granted an "incentive stock option", unless the exercise
price per share is at least 110% of the Fair Market Value of the Common
Stock subject to the Option on the date of grant of the Option and the
Option, by its terms, is not exercisable after the expiration of five years
from the date the Option is granted.
(iii) To the extent that aggregate fair market value (determined at the
time the Option is granted) of the shares of Common Stock in respect of
which an Option is exercisable for the first time by the Option holder
during any calendar year (and taking into account all "incentive stock
option" plans of the Corporation and its subsidiaries) exceeds $100,000,
that number of whole shares for which an option issued hereunder is
exercisable with an aggregate fair market value in excess of this $100,000
limit shall not be treated as having been granted under an "incentive stock
option"; and
(iv) Any other terms and conditions specified by the Board of Directors
that are not inconsistent with the Plan, except that such terms and
conditions must be consistent with the requirements for "incentive stock
options" under Section 422 of the Code.
8. METHODS OF EXERCISE OF OPTIONS
(a) An Option holder (or other person or persons, if any, entitled to
exercise an Option hereunder) desiring to exercise an Option granted pursuant
to the Plan as to all or part of the shares of Common Stock covered by the
Option shall (i) notify the Corporation in writing at its principal office at
748 Miller Drive, S.E., Leesburg, Virginia 20175 to that effect, specifying
the number of shares of Common Stock to be purchased and the method of payment
therefor, and (ii) make payment or provisions for payment for the shares of
Common Stock so purchased in accordance with this Paragraph 8. Such written
notice may be given by means of a facsimile
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transmission. If a facsimile transmission is used, the Option holder should
mail the original executed copy of the written notice to the Corporation
promptly thereafter.
(b) Payment or provision for payment shall be made as follows:
(i) The Option holder shall deliver to the Corporation at the address set
forth in subparagraph 8(a), United States currency in an amount equal to
the aggregate purchase price of the shares of Common Stock as to which such
exercise relates; or
(ii) The Option holder shall tender to the Corporation shares of Common
Stock already owned by the Option holder that, together with any cash
tendered therewith, have an aggregate fair market value (determined based
on the Fair Market Value of a share of Common Stock on the date the notice
set forth in subparagraph 8(a) is received by the Corporation) equal to the
aggregate purchase price of the shares of Common Stock as to which such
exercise relates; or
(iii) The Option holder shall deliver to the Corporation an exercise
notice together with irrevocable instructions to a broker to deliver
promptly to the Corporation the amount of sale or loan proceeds necessary
to pay the aggregate purchase price of the shares of Common Stock as to
which such exercise relates and to sell the shares of Common Stock to be
issued upon exercise of the Option and deliver the cash proceeds, less
commissions and brokerage fees to the Option holder or to deliver the
remaining shares of Common Stock to the Option holder.
Notwithstanding the foregoing provisions, the Committee and the Board of
Directors, in granting Options pursuant to the Plan, may limit the methods in
which an Option may be exercised by an person and, in processing any purported
exercise of an Option granted pursuant to the Plan, may refuse to recognize
the method of exercise selected by the Option holder (other than the method of
exercise set forth in subparagraph 8(b)(i)).
(c) In addition to the alternative methods of exercise set forth in
subparagraph (b), holders of Nonqualified Stock Options shall be entitled, at
or prior to the time the written notice provided for in subparagraph 8(a) is
delivered to the Corporation, to elect to have the Corporation withhold from
the shares of Common Stock to be delivered upon exercise of the Nonqualified
Stock Option that number of shares of Common Stock (determined based on the
Fair Market Value of a share of Common Stock on the date the notice set forth
in subparagraph 8(a) is received by the Corporation) necessary to satisfy any
withholding taxes attributable to the exercise of the Nonqualified Stock
Option. Alternatively, such holder of a Nonqualified Stock Option may elect to
deliver previously owned shares of Common Stock upon exercise of the
Nonqualified Stock Option to satisfy any withholding taxes attributable to the
exercise of the Nonqualified Stock Option. If the Board of Directors does not
include any provisions relating to this withholding feature in its resolutions
granting the Nonqualified Stock Option or in the Option Agreement, however,
the maximum amount that an Option holder may elect to have withheld from the
shares of Common Stock otherwise deliverable upon exercise or the maximum
number of previously owned shares an Option holder may deliver shall be equal
to the minimum federal and state withholding. Notwithstanding the foregoing
provisions, the Committee or the Board of Directors may include in the Option
Agreement relating to any such Nonqualified Stock Option provisions limiting
or eliminating the Option holder's ability to pay his withholding tax
obligation with shares of Common Stock or, if no such provisions are included
in the Option Agreement but in the opinion of the Committee or the Board of
Directors such withholding would have an adverse tax, accounting or other
effect to the Corporation, at or prior to exercise of the Nonqualified Stock
Option, the Committee or the Board of Directors may so limit or eliminate the
Option holder's ability to pay his withholding tax obligation with shares of
Common Stock. Notwithstanding the foregoing provisions, a holder of a
Nonqualified Stock Option may not elect any of the methods of satisfying his
withholding tax obligation in respect of any exercise if, in the opinion of
counsel to the Corporation, such method would not be in compliance with all
applicable laws and regulations.
(d) An Option holder at any time may elect in writing to abandon an Option
in respect of all or part of the number of shares of Common Stock as to which
the Option shall not have been exercised.
(e) An Option holder shall have none of the rights of a stockholder of the
Corporation until the shares of Common Stock covered by the Option are issued
to him upon exercise of the Option.
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9. TERMS AND CONDITIONS OF RESTRICTED SHARE AWARDS
(a) Each award of Restricted Shares under the Plan shall be evidenced by a
Restricted Stock Agreement between the recipient and the Corporation. Such
Restricted Shares shall be subject to all applicable terms of the Plan and may
be subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Restricted Stock Agreements entered into under the
Plan need not be identical.
(b) Restricted Shares may be sold or awarded under the Plan for such
consideration as the Committee may determine, including (without limitation)
cash, cash equivalents, full-recourse promissory notes, past services and
future services; provided, however, that to the extent that an Award consists
of newly issued Restricted Shares, the Award recipient shall furnish
consideration with a value not less than the par value of such Restricted
Shares in the form of cash equivalents or past services rendered to the
Corporation or its subsidiaries, as the Committee may determine.
(c) Each award of Restricted Shares may or may not be subject to vesting.
Vesting shall occur, in full or in installments, upon satisfaction of the
conditions specified in the Restricted Stock Agreement. A Restricted Stock
Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. Notwithstanding
the foregoing, each Restricted Stock Agreement shall provide that all
Restricted Stock Shares subject to the agreement shall become fully vested in
the event that a Change in Control occurs with respect to the Corporation,
except if the Corporation and the other party to the transaction constituting
a Change in Control of the Corporation agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes, and if
such transaction in fact is so treated, then the acceleration of vesting shall
not occur to the extent that the Corporation's independent accountants and
such other party's independent accountants each determine in good faith that
such acceleration would preclude the use of "pooling of interests" accounting.
(d) The holders of Restricted Shares awarded under the Plan shall have the
same voting, dividend and other rights as the Corporation's other
stockholders. A Restricted Stock Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid.
10. AMENDMENTS AND DISCONTINUANCE OF THE PLAN
The Board of Directors shall have the right at any time and from time to
time to amend, modify, or discontinue the Plan provided that, except as
provided in subparagraph 6(c), no such amendment, modification, or
discontinuance of the Plan shall (i) revoke or alter the terms of any Award
previously granted pursuant to the Plan, (ii) increase the number of shares of
Common Stock to be reserved for issuance and sale pursuant to Awards granted
pursuant to the Plan, (iii) change the maximum aggregate number of shares of
Common Stock that may be issued upon or in connection with Awards granted
pursuant to the Plan to any single individual, (iv) decrease the price
determined pursuant to the provisions of subparagraph 7(b), (v) change the
class of persons to whom Awards may be made pursuant to the Plan, or (vi)
provide for Options exercisable more than 10 years after the date granted.
11. PLAN SUBJECT TO GOVERNMENTAL LAWS AND REGULATIONS
The Plan and the terms of the Awards made pursuant to the Plan shall be
subject to all applicable governmental laws and regulations. Notwithstanding
any other provision of the Plan to the contrary, the Board of Directors may in
its sole and absolute discretion make such changes in the Plan as may be
required to conform the Plan to such laws and regulations.
12. DURATION OF THE PLAN
No Awards may be made pursuant to the Plan after the close of business on
March 31, 2009.
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PRECISION AUTO CARE, INC.
The undersigned hereby appoints Charles L. Dunlap, H. Clifford Harris and
Eliot G. Bowytz and each of them as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and vote, as set forth
below, all the shares of Common Stock of Precision Auto Care, Inc., held of
record by the undersigned on April 14, 1999, at the Special Meeting of
Shareholders to be held on May 25, 1999, or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 and 3.
1. Approval of the issuance of Common Stock by the Company in payment of
interest and a financing fee in connection with a $5,000,000
Subordinated Debenture due May 25, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
2. Approval of the adoption of the 1999 Employee Stock Option and
Restricted Stock Plan and the reservation of the 600,000 shares of
Common Stock for issuance thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of the grant of restricted stock awards to the non-employee
members of the Company's Board of Directors.
[_] FOR [_] AGAINST [_] ABSTAIN
Please sign your name(s) on reverse side
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, IF PROPERLY
EXECUTED, IT WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1,
2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
Please sign your name exactly as it appears hereon. If shares are held
jointly, all holders must sign. When signing in a fiduciary or representative
capacity (attorney, executor, administrator, trustee, guardian, officer of
corporation, etc.) please give full title as such. The signer hereby revokes
all proxies heretofore given by the signer to vote at such meeting or and
adjournment thereof.
Dated _____ , 19
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Signature
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Signature
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
