Document:

Exhibit 10.2

 

THE SHARES ISSUABLE PURSUANT TO THIS
AGREEMENT ARE SUBJECT TO THE PROVISIONS OF THE COMPANY’S 2005 EQUITY-BASED
COMPENSATION PLAN AND THIS AGREEMENT IS ENTERED INTO PURSUANT THERETO.  A COPY OF SUCH PLAN IS AVAILABLE UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.

 

J. L. HALSEY CORPORATION

2005 EQUITY-BASED COMPENSATION PLAN

 

NONSTATUTORY STOCK
OPTION AGREEMENT

 

 

	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  

 

Re:                               Grant of Stock Option

 

Dear                               :

 

The
board of directors (the “Board”) of J.L. Halsey Corporation (the “Company”) has
adopted the Company’s 2005 Equity-Based Compensation Plan (the “Plan”) for
certain employees of the Company and its Subsidiaries.  A copy of the Plan is being furnished to you
concurrently with the execution of this Nonstatutory Stock Option Agreement
(the “Option Agreement”) and shall be deemed a part of this Option Agreement as
if fully set forth herein.  Unless the
context otherwise requires, all terms defined in the Plan shall have the same
meaning when used herein.

 

1.                                       The Grant.  Subject to the conditions set forth below,
the Company hereby grants to you, effective as of                                
(“Grant Date”), as a matter of separate inducement and not in lieu of any
salary or other compensation for your services, the right and option to
purchase (the “Option”), in accordance with the terms and conditions set forth
herein and in the Plan, an aggregate of                    
shares of Stock of the Company (the “Option Shares”), at the Exercise Price (as
hereinafter defined).  As used herein, the term “Exercise Price” shall mean a price
equal to $                
per share, subject to the adjustments and limitations set forth herein and in
the Plan.  The Option granted hereunder
is intended to constitute an Option which is not designed pursuant to section 422
of the Internal Revenue Code of 1986, as amended; however, you should consult
with your tax advisor concerning the proper reporting of any federal or state
tax liability that may arise as a result of the grant or exercise of the
Option.

 

 

2.                                       Exercise.

 

(a)                                  For purposes of this Option
Agreement, the Option Shares shall be deemed “Nonvested Shares” unless and
until they have become “Vested Shares.” 
The Option shall in all events terminate at the close of business on the
tenth (10) anniversary of the date of this Option Agreement.  Subject to other terms and conditions set
forth herein, the Option may be exercised in cumulative installments as follows:                                                                         .

 

Option
Shares shall constitute Vested Shares once they are exercisable.

 

(b)                                 Subject to the relevant
provisions and limitations contained herein and in the Plan, you may exercise
the Option to purchase all or a portion of the applicable number of Vested
Shares at any time prior to the termination of the Option pursuant to this
Option Agreement.  In no event shall you
be entitled to exercise the Option for any Nonvested Shares or for a fraction
of a Vested Share.

 

(c)                                  Any exercise by you of the
Option shall be in writing addressed to the Secretary of the Company at its
principal place of business (a copy of the form of exercise to be used will be
available upon written request to the Secretary), and shall be accompanied by a
certified or bank check payable to the order of the Company in the full amount
of the Exercise Price of the shares so purchased, or in such other manner as
described in the Plan and approved by the Committee.

 

The
terms and provisions of the employment agreement, if any, between you and the
Company or any Subsidiary (the “Employment Agreement”) that relate to or affect
the Option are incorporated herein by reference.  Notwithstanding the foregoing provisions of
this Section 2, in the event of any conflict or inconsistency between the
terms and conditions of this Section 2 and the terms and conditions of the
Employment Agreement, the terms and conditions of the Employment Agreement
shall be controlling.

 

3.                                       Termination
of Employment.  Except as provided
below in this Section 3 upon the termination of your employment with the
Company or any Subsidiary, any and all Options held by you that are not then
exercisable will become null and void upon the date of such termination and you
may, until the earlier of (x) ninety (90) days from the date of such
termination or (y) the expiration of the Option in accordance with its terms,
exercise the Option with respect to all or any part of the Vested Shares which
you were entitled to purchase immediately prior to such termination and,
thereafter, the Option shall, to the extent not previously exercised,
automatically terminate and become null and void, provided that:

 

(a)                                  in the case of termination of
your employment with the Company or any Subsidiary due to death, your estate
(or any Person who acquired the right to exercise such Option by bequest or
inheritance or otherwise by reason of your death) may, until the earlier of (x)
the date that is one (1) year after the date of death or (y) the expiration of
the Option in accordance with its terms, exercise the Option with respect to
all or any part of the Vested Shares to which the Option relates;

 

(b)                                 in the case of termination of your
employment with the Company or any Subsidiary due to your Disability, as
determined in the sole discretion of the Committee and as

 

2

 

defined
in Section 15, you or your legal representative may, until the earlier of
(x) the one hundred and eightieth (180) day after the date your employment was
terminated or (y) the expiration of the Option in accordance with its terms,
exercise the Option with respect to all or any part of the Vested Shares to
which the Option relates;

 

(c)                                  in the case of termination of
your employment by the Company or any Subsidiary for any reason other than
Cause, as determined in the sole discretion of the Committee and as defined in Section 15,
within one (1) year of a Change in Control or in the case of your resignation
from the Company or any Subsidiary for Good Reason, as determined in the sole
discretion of the Committee and as defined in Section 15, within one (1)
year of a Change in Control, then any portion of the Option held by you as of
the date of separation that is not yet exercisable but would, pursuant to Section 2(a),
become exercisable over the twelve month period immediately following such
termination, shall become exercisable as of the date of separation, and any
portion of the Option held by you as of the date of separation that is
exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (x) the remainder of the term of the
Option or (y) the date which is one (1) year after the termination of
employment; and

 

(d)                                 if you are on leave of absence
for any reason, the Company may, in its sole discretion, determine that you
will be considered to still be in the employ of or providing services for the
Company, provided that rights to the Option Shares will be limited to the
extent to which those rights were earned or vested when the leave or absence
began.

 

Notwithstanding
the foregoing provisions of this Section 3, in the event of any conflict
or inconsistency between the terms and conditions of this Section 3 and
the terms and conditions of the Employment Agreement, the terms and conditions
of the Employment Agreement shall be controlling.

 

4.                                       Transferability.  Any rights or interests herein will be
assignable or transferable by you only as provided in Section 10(a) of the
Plan and by will or the laws of descent and distribution.

 

5.                                       Withholding
Taxes.  The Committee may, in its
discretion, require you to pay to the Company (or the Company’s Subsidiary if
you are an employee of a Subsidiary of the Company), at the time of the
exercise of an Option or thereafter, the amount that the Committee deems
necessary to satisfy the Company’s or its Subsidiary’s current or future
obligation to withhold federal, state or local income or other taxes that you
incur by exercising an Option.  In
connection with the exercise of an Option requiring tax withholding, you may
(a) direct the Company to withhold from the shares of Stock to be issued to you
the number of shares necessary to satisfy the Company’s obligation to withhold
taxes, that determination to be based on the shares’ Fair Market Value as of
the date of exercise; (b) deliver to the Company sufficient shares of Stock
(based upon the Fair Market Value as of the date of such delivery) to satisfy
the Company’s tax withholding obligation, which tax withholding obligation is
based on the shares’ Fair Market Value as of the later of the date of exercise
or the date as of which the shares of Stock issued in connection with such
exercise become includable in your income; or (c) deliver sufficient cash to
the Company to satisfy its tax withholding obligations.  If you elect to use such a Stock withholding
feature you must make the election at the time and in the manner that the

 

3

 

Committee prescribes.  The
Committee may, at its sole option, deny your request to satisfy withholding
obligations through Stock instead of cash. 
In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then you shall pay to the Company,
immediately upon the Committee’s request, the amount of that deficiency in the
form of payment requested by the Committee.

 

6.                                       Adjustments.  The terms of an Option shall be subject to
adjustment from time to time, in accordance with the following provisions:

 

(a)                                  If at any time, or from time to
time, the Company shall subdivide as a whole (by reclassification, by a Stock
split, by the issuance of a distribution on Stock payable in Stock or
otherwise) the number of shares of Stock then outstanding into a greater number
of shares of Stock, then (i) the number of shares of Stock (or other kind of
securities) that may be acquired under the Option shall be increased
proportionately and (ii) the price (including Exercise Price) for each share of
Stock (or other kind of shares or securities) subject to the then outstanding
Option shall be reduced proportionately, without changing the aggregate
purchase price or value of the outstanding Option.

 

(b)                                 If at any time, or from time to
time, the Company shall consolidate as a whole (by reclassification, reverse
Stock split or otherwise) the number of shares of Stock then outstanding into a
lesser number of shares of Stock, (i) the number of shares of Stock (or other
kind of shares or securities) that may be acquired under the Option shall be
decreased proportionately; and (ii) the price (including Exercise Price) for
each share of Stock (or other kind of shares or securities) subject to the
Option shall be increased proportionately, without changing the aggregate
purchase price or value of the outstanding Option.

 

(c)                                  Whenever the number of shares of
Stock subject to the Option and the price for each share of Stock subject to
the Option are required to be adjusted as provided in this Section 6, the
Committee shall promptly prepare a notice setting forth, in reasonable detail,
the event requiring adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the change in price and the number of
shares of Stock, other securities, cash, or property purchasable subject to the
Option after giving effect to the adjustments. 
The Committee shall promptly give you such a notice.

 

(d)                                 Adjustments under this Section 6
shall be made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding, and
conclusive.  No fractional interest shall
be issued under the Plan on account of any such adjustments.

 

7.                                       Notice.  All notices required or permitted under this
Option Agreement must be in writing and personally delivered or sent by mail
and shall be deemed to be delivered on the date on which it is actually received
by the person to whom it is properly addressed. A notice shall be effective
when actually received by the Company in writing and in conformance with this
Option Agreement and the Plan.  Until
changed in accordance herewith, the Legal Department and the optionee specify
their respective addresses as set forth below:

 

4

 

	
  Legal Department:

  	
   

  	
  J. L. Halsey Corporation

  
	
   

  	
   

  	
  103 Foulk Road, Suite 205-Q

  
	
   

  	
   

  	
  Wilmington, Delaware 19803

  
	
   

  	
   

  	
  Attention: David Burt

  
	
   

  	
   

  	
   

  
	
  Optionee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

8.                                       Information
Confidential.  As partial
consideration for the granting of this Option, you agree that you will keep
confidential all information and knowledge that you have relating to the manner
and amount of your participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to your spouse, tax and financial advisors, or a financial institution to the
extent that such information is necessary to obtain a loan.

 

9.                                       Furnish
Information.  You agree to furnish to
the Company all information requested by the Company to enable it to comply
with any reporting or other requirement imposed upon the Company by or under
any applicable statute or regulation.

 

10.                                 Company Records.  Records of the Company or its Subsidiaries
regarding your period of employment, termination of employment and the reason
therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder.

 

11.                                 Successors.  This Agreement shall be binding upon you,
your legal representatives, heirs, legatees and distributees, and upon the
Company, its successors and assigns.

 

12.                                 Headings.  The titles and headings of paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.

 

13.                                 Governing Law.  All questions arising with respect to the
provisions of this Agreement shall be determined by application of the laws of
the State of Delaware except to the extent Delaware law is preempted by federal
law.  The obligation of the Company to
sell and deliver Stock hereunder is subject to applicable laws and to the
approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.

 

14.                                 Word Usage.  Words used in the masculine shall apply to
the feminine where applicable, and wherever the context of this Agreement
dictates, the plural shall be read as the singular and the singular as the
plural.

 

15.                                 Miscellaneous.

 

(a)                                  This Option Agreement is subject
to all the terms, conditions, limitations and restrictions contained in the
Plan.  In the event of any conflict or
inconsistency between the terms hereof and the terms of the Plan, the terms of
the Plan shall be controlling.

 

5

 

(b)                                 This Option Agreement is not a
contract of employment and the terms of your employment shall not be affected
by, or construed to be affected by, this Option Agreement, except to the extent
specifically provided herein.  Nothing
herein shall impose, or be construed as imposing, any obligation (i) on the
part of the Company or any Subsidiary to continue your employment, or (ii) on
your part to remain in the employ of the Company or any Subsidiary.

 

(c)                                  This Option Agreement may be
amended as provided in Section 10(c) of the Plan.

 

(d)                                 Definitions.

 

(i)                                     Cause shall have the meaning given
such term in your Employment Agreement (if any) with the Company or a
Subsidiary of the Company; provided,
however, that if you do not have an Employment Agreement or
such agreement does not define Cause, Cause shall mean, as determined by the
Board or Committee in its sole discretion exercised in good faith, (A) your
breach of any nondisclosure, noncompetition, or other agreement to which you
and the Company are parties; (B) your commission of a felony or of a
misdemeanor involving moral turpitude; (C) the participation by you in any
fraud; (D) your dishonesty that is detrimental to the best interest of the
Company; (E) the willful and continued failure by you to substantially perform
your duties to the Company (other than any such failure resulting from your
incapacity due to physical or mental illness) after written demand for
substantial performance is delivered by the Company specifically identifying
the manner in which the Company believes you have not substantially performed
your duties; or (F) the willful engagement by you in misconduct which is
materially injurious to the Company, monetarily or otherwise.

 

(ii)                                  Disability shall have the meaning given
such term in your Employment Agreement (if any) with the Company or a
Subsidiary of the Company; provided, however, that if you do not have an Employment
Agreement or it does not define Disability, Disability shall mean, as
determined by the Board or Committee in its sole discretion exercised in good
faith, a physical or mental impairment of sufficient severity that either you
are unable to continue performing the duties you performed before such
impairment or your condition entitles you to disability benefits under any
insurance or employee benefit plan of the Company or its subsidiaries and that
impairment or condition is cited by the Company as the reason for termination
of your employment.

 

(iii)                               Good
Reason
shall have the meaning given such term in your Employment Agreement (if any)
with the Company or a Subsidiary of the Company; provided, however, that if you do
not have an Employment Agreement or the Employment Agreement does not define
Good Reason, Good Reason shall mean, as determined by the Board or Committee in
its sole discretion exercised in good faith, the occurrence of one or more of
the following events: (A) breach by the Company of any provision of you
Employment Agreement where such breach continues for a period of ten (10) days
after written notice thereof by you; (B) the Company gives notice to you
pursuant to the provisions of your Employment Agreement that the Company does
not

 

6

 

wish to extend the Employment
Agreement and you resign before the expiration of the Employment Agreement; (C)
relocation of your regular work address by more than fifty miles without your
consent; or (D) any material adverse change in your job responsibilities,
duties, functions, status, offices, title, prerequisites or support staff.  By way of example only and without limiting
the applicability of the preceding clause, a material adverse change in your
job responsibilities, functions and status would result from a demotion which
significantly reduces your discretion and independent judgment within the
Company or significantly reduces the number of employees subject to your
authority.

 

[Remainder of page intentionally left blank]

 

7

 

Please
indicate your acceptance of all the terms and conditions of the Option and the
Plan by signing and returning a copy of this Option Agreement.

 

	
   

  	
   

  	
  J. L. Halsey Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

	
  ACCEPTED:

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Signature of Optionee

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Name of Optionee (Please Print)

  
	
   

  
	
  Date:

  	
   

  	
  ,

  	
   

  	
   

  
					

 

8Exhibit 10.1

 

CHEVY CHASE BANK

 

PROMISSORY NOTE

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  250,000.00

  	
   

  	
  03-01-2005

  	
   

  	
  03-01-2006

  	
   

  	
  9001

  	
   

  	
  4A0 / 8120

  	
   

  	
  0120535

  	
   

  	
  40536

  	
   

  	
   

  	
   

  
																	

 

References in the shaded area are for Lender’s
use only and do not limit the applicability of this document to any particular
loan or item. Any item above containing ***** has been omitted due to text
length limitations.

 

	
  Borrower: 

  	
  PRECISION AUTO CARE, INC.

  	
   

  	
  Lender: 

  	
  Chevy Chase Bank, F.S.B.

  
	
   

  	
  748 Miller Drive, S.E.

  	
   

  	
   

  	
  Commercial Banking Division

  
	
   

  	
  Leesburg, VA 20175

  	
   

  	
   

  	
  7501 Wisconsin Avenue, 12th Floor

  
	
   

  	
   

  	
   

  	
   

  	
  Bethesda, MD 20814

  

 

	
  Principal
  Amount: $250,000.00

  	
   

  	
  Initial Rate: 5.500%

  	
   

  	
  Date of Note: March 1, 2005

  

 

PROMISE TO PAY. PRECISION AUTO CARE, INC. (“Borrower”)
promises to pay to Chevy Chase Bank, F.S.B. (“Lender”), or order, in lawful
money of the United States of America, the principal amount of Two Hundred
Fifty Thousand & 00/100 Dollars ($250,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal balance
of each advance. Interest shall be calculated from the date of each advance
until repayment of each advance.

 

PAYMENT. Borrower will pay this loan in one
payment of all outstanding principal plus all accrued unpaid interest on March
1, 2006. In addition, Borrower will pay regular monthly payments of all accrued
unpaid interest due as of each payment date, beginning April 1, 2005, with all
subsequent interest payments to be due on the same day of each month after
that. Unless otherwise agreed or required by applicable law, payments will be
applied first to any unpaid collection costs; then to any late charges; then to
any accrued unpaid interest; and then to principal. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

 

VARIABLE INTEREST RATE. The interest rate on
this Note is subject to change from time to time based on changes in an
independent index which is the highest Prime Rate as published in the Money
Rates Section of The Wall Street Journal (the “Index”). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower’s request. The interest rate change will not
occur more often than each day. Borrower understands that Lender may make loans
based on other rates as well. The Index currently is
5.500% per annum. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate equal to the Index, resulting in an
initial rate of 5.500% per annum, NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by
applicable law.

 

PREPAYMENT. Borrower agrees that all loan fees
and other prepaid finance charges are earned fully as of the date of the loan
and will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. Except for the
foregoing, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower’s obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked “paid in full”,
“without recourse”, or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender’s rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or
other payment instrument that indicates that the payment constitutes “payment
in full” of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: Chevy Chase Bank, F.S.B.; Commercial Banking Division; 7501
Wisconsin Avenue, 12th Floor; Bethesda, MD 20814.

 

LATE CHARGE. If a payment is 15 days or more
late, Borrower will be charged 5.000% of the regularly
scheduled payment or $2.00, whichever is greater.

 

INTEREST AFTER DEFAULT. Upon default,
including failure to pay upon final maturity, Lender, at its option, may, if
permitted under applicable law, increase the variable interest rate on this
Note to 3.000 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law.

 

DEFAULT. Each of the following shall
constitute an event of default (“Event of Default”) under this Note:

 

Payment Default.
Borrower fails to make any payment when due under this Note.

 

Other Defaults. Borrower
fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Note or in any of the related documents or to
comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Borrower.

 

Default in Favor of Third Parties. Borrower
or any Grantor defaults under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower’s property
of Borrower’s ability to repay this Note or perform Borrower’s obligations
under this Note or any of the related documents.

 

False Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower
or on Borrower’s behalf under this Note or the related documents is false or
misleading in any material respect, either now or at the time made or furnished
or becomes false or misleading at any time thereafter.

 

Insolvency. The
dissolution or termination of Borrower’s existence as a going business, or a
trustee or receiver is appointed for Borrower or for all or a substantial
portion of the assets of Borrower, or Borrower makes a general assignment for
the benefit of Borrower’s creditors, or Borrower files for bankruptcy, or an
involuntary bankruptcy petition is filed against Borrower and such involuntary
petition remains undismissed for sixty (60) days.

 

Creditor or Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any creditor of
Borrower or by any governmental agency against any collateral securing the
loan. This includes a garnishment of any of Borrower’s accounts, including
deposit accounts, with Lender. However, this Event of Default shall not apply
if there is a good faith dispute by Borrower as to the validity or
reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or
forfeiture proceeding and deposits with Lender monies or a surety bond for the
creditor or forfeiture proceeding, in an amount determined by Lender, in its
sole discretion, as being an adequate reserve or bond for the dispute.

 

Events Affecting Guarantor. Any
of the preceding events occurs with respect to any guarantor, endorser, surety,
or accommodation party of any of the indebtedness or any guarantor, endorser,
surety, or accommodation party dies or becomes incompetent, or revokes or
disputes the validity of, or liability under, any guaranty of the indebtedness
evidenced by this Note. In the event of a death, Lender, at its option, may,
but shall not be required to, permit the guarantor’s estate to assume
unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event of Default.

 

Change in Ownership. Any
change in ownership of twenty-five percent (25%) or more of the common stock of
Borrower.

 

Adverse Change. A
material adverse change occurs in Borrower’s financial condition, or Lender
believes the prospect of payment or performance of this Note is impaired.

 

Cure Provisions. If
any default, other than a default in payment is curable and if Borrower has not
been given a notice of a breach of the same provision of this Note within the
preceding twelve (12) months, it may be cured if Borrower, after receiving
written notice from Lender demanding cure of such default: (1) cures the
default within fifteen (15) days; or (2) if the cure requires more than fifteen
(15) days, immediately initiates steps which Lender deems in Lender’s sole
discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance
as soon as reasonably practical.

 

LENDER’S RIGHTS. Upon default, Lender may
declare the entire unpaid principal balance on this Note and all accrued unpaid
interest, together with all other applicable fees, costs and charges, if any,
immediately due and payable, and then Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES.  Subject to any limits under applicable law,
upon default, Borrower agrees to pay Lender’s attorneys’ fees equal to 15.000%
of the principal balance due on the loan and all of Lender’s other collection
expenses, whether or not there is a lawsuit, including without limitation legal
expenses for bankruptcy proceedings.

 

JURY WAIVER, LENDER AND BORROWER EACH HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO WHICH LENDER OR BORROWER MAY BE PARTIES, ARISING OUT
OF, OR IN ANY WAY PERTAINING TO, THIS NOTE. IT IS AGREED THAT THIS WAIVER
CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH
ACTIONS OR PROCEEDINGS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY
MADE BY LENDER AND BORROWER, AND LENDER AND BORROWER EACH HEREBY REPRESENT THAT
NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS
EFFECT. BORROWER FURTHER REPRESENTS THAT BORROWER HAS BEEN

 

 

REPRESENTED IN THE SIGNING OF THIS NOTE AND IN THE MAKING OF THIS
WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF BORROWER’S OWN FREE WILL, AND
THAT BORROWER HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

 

GOVERNING LAW. This Note will be governed by
federal law applicable to Lender and, to the extent not preempted by federal
law, the laws of the State of Maryland without regard to its conflicts of law
provisions. This Note has been accepted by Lender in the State of Maryland.

 

CONFESSED JUDGMENT. UPON THE
OCCURRENCE OF A DEFAULT, BORROWER HEREBY AUTHORIZES ANY ATTORNEY DESIGNATED BY
LENDER OR ANY CLERK OF ANY COURT OF RECORD TO APPEAR FOR BORROWER IN ANY COURT
OF RECORD AND CONFESS JUDGMENT WITHOUT PRIOR HEARING AGAINST BORROWER IN FAVOR
OF LENDER FOR, AND IN THE AMOUNT OF, THE UNPAID BALANCE OF THE PRINCIPAL AMOUNT
OF THIS NOTE, ALL INTEREST ACCRUED AND UNPAID THEREON, ALL OTHER AMOUNTS
PAYABLE BY BORROWER TO LENDER UNDER THE TERMS OF THIS NOTE OR ANY OTHER
AGREEMENT, DOCUMENTS. INSTRUMENT EVIDENCING, SECURING OR GUARANTYING THE
OBLIGATIONS EVIDENCED BY THIS NOTE, COSTS OF SUIT, AND ATTORNEYS’ FEES OF
FIFTEEN PERCENT (15%) OF THE UNPAID BALANCE OF THE PRINCIPAL AMOUNT OF THIS
NOTE AND INTEREST THEN DUE HEREUNDER.

 

Borrower hereby releases, to the extent permitted by applicable law,
all errors and all rights of exemption, appeal, stay of execution, inquisition,
and other rights to which Borrower may otherwise be entitled under the laws of
the United States or of any state or possession of the United States now in
force and which may hereafter be enacted. The authority and power to appear for
and enter Judgment against Borrower shall not be exhausted by one or more
exercises thereof or by any imperfect exercise thereof and shall not be
extinguished by any judgment entered pursuant thereto. Such authority may be
exercised on one or more occasions or from time to time in the same or
different jurisdictions as often as Lender shall deem necessary or desirable,
for all of which this Note shall be a sufficient warrant.

 

DISHONORED ITEM FEE.  Borrower will pay a fee to Lender of $20.00
If Borrower makes a payment on Borrower’s loan and the check with which
Borrower pays is dishonored on the second presentment.

 

RIGHT OF SETOFF.  To the extent permitted by applicable law,
Lender reserves a right of setoff in all Borrower’s accounts with Lender
(whether checking, savings, or some other account).  This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the
future.  However, this does not include
any IRA or Keogh accounts, or any trust accounts for which setoff would be
prohibited by law, Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze
all such accounts to allow Lender to protect Lender’s charge and setoff rights
provided in this paragraph.

 

LINE OF CREDIT.  This Note evidences a revolving line of
credit.  Advances under this Note may be
requested only in writing by Borrower or as provided in this paragraph.  All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender’s
office shown above.  The following
persons currently are authorized, except as provided in this paragraph, to
request advances and authorize payments under the line of credit until Lender
receives from Borrower, at Lender’s address shown above, written notice of
revocation of their authority: Robert R. Falconi,
President of  PRECISION AUTO CARE, INC.;
Frederick F. Simmons, Senior Vice President of PRECISION AUTO CARE, INC.;
and Mark P. Francis, Controller of PRECISION AUTO
CARE, INC.  All Advance requests must be
signed by any two (2) of above authorized persons.  Borrower agrees to be liable for all sums
either: (A) advanced in accordance with the instructions of an authorized person
or (B) credited to any of Borrower’s accounts with Lender.  The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender’s
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: 
(A) Borrower or any guarantor is in default under the terms of this Note
or any agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note;  (B) Borrower or any guarantor ceases doing
business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts
to limit, modify or revoke such guarantor’s guarantee of this Note or any other
loan with Lender; or (D) Borrower has applied funds provided pursuant to this
Note for purposes other than those authorized by Lender.

 

CLARIFICATION OF GOVERNING LAW.
Notwithstanding anything to the contrary in any of the documents, the parties
agree that federal law governs the Agreement or Promissory Note, as the case
may be, and Maryland law will apply only to the extent it is not otherwise
superceded or preempted by federal law.

 

PRIOR NOTE. 
This note represents a renewal of that certain Promissory Note date
March 9, 2004, made by Borrower to Lender in the original principal amount of
$250,000.00.

 

CONSENT TO JURISDICTION.  Borrower irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Maryland
over any suit, action, or proceeding arising out of or relating to this
Note.  Borrower irrevocably waives, to
the fullest extent permitted by law, any objection that Borrower may now or
hereafter have to the laying of venue of any such suit, action, or proceeding
brought in any such court and any claim that any such suit, action, or
proceeding brought in any such court has been brought in an inconvenient forum.
Final judgment in any such suit, action, or proceeding brought in any such
court shall be conclusive and binding upon Borrower and may be enforced in any
court in which Borrower is subject to jurisdiction by a suit upon such judgment
provided that service of process is effected upon Borrower as provided in this
Note or as otherwise permitted by applicable law.

 

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

 

GENERAL PROVISIONS.  If any part of this Note cannot be enforced,
this fact will not affect the rest of the Note. Borrower does not agree or
intend to pay, and Lender does not agree or intend to contract for, charge,
collect, take, reserve or receive (collectively referred to herein as “charge
or collect”), any amount in the nature of interest or in the nature of a fee
for this loan, which would in any way or event (including demand, prepayment,
or acceleration) cause Lender to charge or collect more for this loan than the
maximum Lender would be permitted to charge or collect by federal law or the
law of the State of Maryland (as applicable). 
Any such excess interest or unauthorized fee shall, instead of anything
stated to the contrary, be applied first to reduce the principal balance of
this loan, and when the principal has been paid in full, be refunded to
Borrower.  Lender may delay or forgo
enforcing any of its rights or remedies under this Note without losing
them.  Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment,
demand for payment, and notice of dishonor. 
Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from
liability.  All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this loan or
release any party or guarantor or collateral; or impair, fail to realize upon
or perfect Lender’s security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to
anyone.  All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other than
the party with whom the modification is made.

 

APPLICABLE LENDING LAW.  To the extent not preempted by federal law,
this loan is being made under the terms and provisions of Subtitle 9 of Title
12 of the Maryland Commercial Law Article.

 

PRIOR TO SIGNING THIS NOTE. 
BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING
THE VARIABLE INTEREST RATE PROVISIONS. 
BORROWER AGREES TO THE TERMS OF THE NOTE.

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY
NOTE.

 

THIS NOTE IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND
SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PRECISION AUTO CARE, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert R. Falconi

  	
  (Seal)

  	
  By:

  	
  /s/ Mark P. Francis

  	
  (Seal)

  
	
   

  	
  Robert R. Falconi, President of PRECISION AUTO

  CARE, INC.

  	
   

  	
  Mark P. Francis, Controller of PRECISION AUTO

  CARE, INC.

  
						

 

2

 

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL /

SUBORDINATE DEBT

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  
	
  $

  	
  250,000.00

  	
   

  	
  03-01-2005

  	
   

  	
  03-01-2006

  	
   

  	
  9001

  	
   

  	
  4A0 / 8120

  	
   

  	
  0120535

  	
   

  	
  40536

  	
   

  	
   

  
																

 

References in the shaded area are for Lender’s use only and do not
limit the applicability of this document to any particular loan or item. Any
item above containing ***** has been omitted due to text length limitations.

 

	
  Corporation

  	
  PRECISION AUTO CARE, INC.

  	
   

  	
  Lender: 

  	
  Chevy Chase Bank, F.S.B.

  
	
   

  	
  748 Miller Drive, S.E.

  	
   

  	
   

  	
  Commercial Banking Division

  
	
   

  	
  Leesburg, VA 20175

  	
   

  	
   

  	
  7501 Wisconsin Avenue, 12th Floor

  
	
   

  	
   

  	
   

  	
   

  	
  Bethesda, MD 20814

  

 

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

 

THE CORPORATION’S EXISTENCE. The complete and
correct name of the Corporation is PRECISION AUTO CARE, INC. (“Corporation”).
The Corporation is a corporation for profit which is, and at all times shall
be, duly organized, validly existing, and in good standing under and by virtue
of the laws of the Commonwealth of Virginia. The Corporation is duly authorized
to transact business in all other states in which the Corporation is doing
business, having obtained all necessary filings, governmental licenses and
approvals for each state in which the Corporation is doing business.
Specifically, the Corporation is, and at all times shall be, duly qualified as
a foreign corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition. The
Corporation has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently proposes to
engage. The Corporation maintains an office at 748 Miller Drive, S.E.,
Leesburg, VA 20175. Unless the Corporation has designated otherwise in writing,
the principal office is the office at which the Corporation keeps its books and
records. The Corporation will notify Lender prior to any change in the location
of The Corporation’s state of organization or any change in The Corporation’s
name.  The Corporation shall do all
things necessary to preserve and to keep in full force and effect its existence,
rights and privileges, and shall comply with all regulations, rules,
ordinances, statutes, orders and decrees of any governmental or quasi-governmental
authority or court applicable to the Corporation and The Corporation’s business
activities.

 

RESOLUTIONS ADOPTED. At a meeting of the
Directors of the Corporation, or if the Corporation is a close corporation
having no Board of Directors then at a meeting of the Corporation’s
shareholders, duly called and held on May 19, 2004, at which a quorum was
present and voting, or by other duly authorized action in lieu of a meeting,
the Directors of the Corporation authorized the officers to establish this line
of credit with Lender.

 

OFFICERS. The following named persons are
officers of PRECISION AUTO CARE, INC.:

 

	
  NAMES

  	
   

  	
  TITLES

  	
   

  	
  AUTHORIZED

  	
   

  	
  ACTUAL
  SIGNATURES

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Robert
  R. Falconi

  	
   

  	
  President

  	
   

  	
  Y

  	
   

  	
  X

  	
  /s/
  Robert R. Falconi

  	
   (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Frederick
  F. Simmons

  	
   

  	
  Senior
  Vice President

  	
   

  	
  Y

  	
   

  	
  X

  	
  /s/
  Frederick F. Simmons

  	
   (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mark P.
  Francis

  	
   

  	
  Controller

  	
   

  	
  Y

  	
   

  	
  X

  	
  /s/ Mark
  P. Francis

  	
   (Seal)

  

 

ACTIONS AUTHORIZED. Any two (2) of the
authorized persons listed above may enter into any agreements of any nature
with Lender, and those agreements will bind the Corporation. Specifically, but
without limitation, any two (2) of such authorized persons are authorized,
empowered, and directed to do the following for and on behalf of the
Corporation:

 

Borrow Money. To
borrow, as a consigner or otherwise, from time to time from Lender, on such terms
as may be agreed upon between the Corporation and Lender, such sum or sums of
money as in their judgment should be borrowed, without limitation.

 

Execute Notes. To
execute and deliver to Lender the promissory note or notes, or other evidence
of the Corporation’s credit accommodations, on Lender’s forms, at such rates of
interest and on such terms as may be agreed upon, evidencing the sums of money
so borrowed or any of the Corporation’s indebtedness to Lender, and also to
execute and deliver to Lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the notes,
any portion of the notes, or any other evidence of credit accommodations.

 

Grant Security. To
mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and
deliver to Lender any property now or hereafter belonging to the Corporation or
in which the Corporation now or hereafter may have an interest, including
without limitation all of the Corporation’s real property and all of the
Corporation’s personal property (tangible or intangible), as security for the
payment of any loans or credit accommodations so obtained, any promissory notes
to executed (including any amendments to or modifications, renewals, and
extensions of such promissory notes), or any other or further indebtedness of
the Corporation to Lender at any time owing, however the same may be evidenced.
Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or
encumbered at the time such loans are obtained or such indebtedness is incurred,
or at any other time or times, and may be either in addition to or in lieu of
any property theretofore mortgaged, pledged, transferred, endorsed,
hypothecated or encumbered.

 

Execute Security Documents. To
execute and deliver to Lender the forms
of mortgage, deed of trust, pledge agreement, hypothecation agreement, and
other security agreements and financing statements which Lender may require and
which shall evidence the terms and conditions under and pursuant to which such
liens and encumbrances, or any of them, are given; and also to execute and
deliver to Lender any other written instruments, any chattel paper, or any
other collateral, of any kind or nature, which Lender may deem necessary or
proper in connection with or pertaining to the giving of the liens and
encumbrances. Notwithstanding the foregoing, any one of the above authorized
persons may execute, deliver, or record financing statements.

 

Subordination. To
subordinate, in all respects, any and all present and future indebtedness,
obligations, liabilities, claims, rights, and demands of any kind which may be
owed, now or hereafter, from any person or entity to the Corporation to all
present and future indebtedness, obligations, liabilities, claims, rights, and
demands of any kind which may be owed, now or hereafter, from such person or
entity to Lender (“Subordinated Indebtedness”), together with subordination by
the Corporation of any and all security interests of any kind, whether now
existing or hereafter acquired, securing payment or performance of the
Subordinated Indebtedness; all on such subordination terms as may be agreed
upon between the Corporation’s Officers and Lender and in such amounts as in
their judgment should be subordinated.

 

Negotiate Items. To
draw, endorse, and discount with Lender all drafts, trade acceptances,
promissory notes, or other evidences of indebtedness payable to or belonging to
the Corporation or in which the Corporation may have an interest, and either to
receive cash for the same or to cause such proceeds to be credited to the
Corporation’s account with Lender, or to cause such other disposition of the
proceeds derived therefrom as they may deem advisable.

 

Further Acts. In the
case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances under such lines, and in all cases, to do
and perform such other acts and things, to pay any and all fees and costs, and
to execute and deliver such other documents and agreements. Including agreements waiving the right to a trial by jury and
confessing judgment against the Corporation, as the officers may in
their discretion deem reasonably necessary or proper in order to carry into
effect the provisions of this Resolution. 
The following persons currently are authorized, except as provided in
this paragraph, to request advances and authorize payments under the line of
credit until Lender receives from the Corporation, at Lender’s address shown
above, written notice or revocation of their authority: Robert R.
Falconi, President of PRECISION AUTO CARE, INC.; Frederick F. Simmons, Senior
Vice President of PRECISION AUTO CARE, INC.; and Mark P. Francis, Controller of
PRECISION AUTO CARE, INC.  All advance
requests must be signed by any two (2) of above authorized persons.

 

ASSUMED BUSINESS NAMES.  The Corporation has filed or recorded all
documents or filings required by law relating to all assumed business names
used by the Corporation.  Excluding the
name of the Corporation, the following is a complete list of all assumed
business names under which the Corporation does business: None.

 

NOTICES TO LENDER.  The Corporation will promptly notify Lender
in writing at Lender’s address shown above (or such other addresses as Lender
may designate from time to time) prior to any (A) change in the Corporation’s
name; (B) change in the Corporation’s assumed business name(s); (C) change in
the management of the Corporation; (D) change in the authorized signer(s); (E)
change in the Corporation’s principal office address; (F) change in the
Corporation’s state of organization; (G) conversion of the Corporation to a new
or different type of business entity; or (H) change in any other aspect of the
Corporation that directly or indirectly relates to any agreements between the
Corporation and Lender.  No change in the
Corporation’s name or state of organization will take effect until after Lender
has received notice.

 

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS.  The officers named above are duly elected,
appointed, or employed by or for the Corporation, as the case may be, and
occupy the positions set opposite their respective names.  This Resolution will, in due course, stand of
record on the books of the Corporation.

 

CONTINUING VALIDITY. Any and all acts
authorized pursuant to this Resolution and performed prior to the passage of
this Resolution will, in due course, be ratified and approved.  This Resolution shall be continuing, shall
remain in full force and effect and Lender may rely on it until written notice
of its revocation shall have been delivered to and received by Lender at Lender’s
address shown above (or such addresses as Lender may designate from time to
time).  Any such notice shall not affect
any of the Corporation’s agreements or commitments in effect at the time notice
is given.

 

 

IN TESTIMONY
WHEREOF, I have hereunto set my hand, affixed the seal of the Corporation and
attest that the signatures set opposite the names listed above are their
genuine signatures.

 

I have read
all the provisions of this Resolution, and I personally and on behalf of the
Corporation certify that all statements and representations made in this
Resolution are true and correct. This Corporate Resolution to Borrow / Grant
Collateral / Subordinate Debt is dated March 1, 2005.

 

THIS RESOLUTION IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS
RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT
ACCORDING TO LAW.

 

	
   

  	
  CERTIFIED
  TO AND ATTESTED BY:

  
	
   

  	
   

  
	
  CORPORATE SEAL

  	
   

  	
  /s/ Frederick
  F. Simmons

  	
  (Seal)

  
	
   

  	
  Frederick
  F. Simmons, Secretary

  
	
   

  	
   

  
				

 

 

NOTE: If the officers
signing this Resolution are designated by the foregoing document as one of the
officers authorized to act on the Corporation’s behalf, it is advisable to have
this Resolution signed by at least one non-authorized officer of the
Corporation.

 

2

 

CHEVY
CHASE BANK

 

DISBURSEMENT
REQUEST AND AUTHORIZATION

 

	
  Principal

  	
   

  	
  Loan Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  	
   

  	
  Initials

  
	
  $

  	
  250,000.00

  	
   

  	
  03-01-2005

  	
   

  	
  03-01-2006

  	
   

  	
  9001

  	
   

  	
  4A0 / 8120

  	
   

  	
  0120535

  	
   

  	
  40536

  	
   

  	
   

  
																

 

References in the shaded area are for Lender’s
use only and do not limit the applicability of this document to any particular
loan or item. Any item above containing ***** has been omitted due to text
length limitations.

 

	
  Borrower:

  	
  PRECISION AUTO CARE, INC.

  	
   

  	
  Lender: 

  	
  Chevy Chase Bank, F.S.B.

  
	
   

  	
  748 Miller Drive, S.E.

  	
   

  	
   

  	
  Commercial Banking Division

  
	
   

  	
  Leesburg, VA 20175

  	
   

  	
   

  	
  7501 Wisconsin Avenue, 12th Floor

  
	
   

  	
   

  	
   

  	
   

  	
  Bethesda, MD 20814

  

 

LOAN TYPE:  This is a Variable
Rate Nondisclosable Revolving Line of Credit Loan to a Corporation for
$250,000.00 due on March 1, 2008.  The
reference rate (highest Prime Rate as published in the Money Rates Section of
The Wall Street Journal, currently 5.500%), resulting in an initial rate of 5.500.
 This is a secured renewal of the
following described indebtedness.  This
Note represents a renewal of that certain Promissory Note date March 9, 2004,
made by Borrower to Lender in the original principal amount of $250,000.00.

 

PRIMARY PURPOSE OF LOAN.  The primary purpose of this loan is for:

 

o Personal,
Family,
or  Household Purposes
or Personal Investment.

 

ý Business (including Real Estate Investment).

 

SPECIFIC PURPOSE.  The specific
purpose of this loan is: Working Capital.

 

DISBURSEMENT INSTRUCTIONS.  Borrower
understands that no loan proceeds will be disbursed until all of Lender’s
conditions for making the loan have been satisfied.  Please disburse the loan proceeds of
$250,000.00 as follows:

 

	
  Other Disbursements:

  	
   

  	
  $

  	
  250,000.00

  	
   

  
	
   

  	
  250,000.00 Renewal of Note 9001

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Note Principal:

  	
   

  	
  $

  	
  250,000.00

  	
   

  
							

 

CHARGES PAID IN CASH, Borrower has paid or will pay in cash as agreed the
following charges:

 

	
  Prepaid Finance Charges Paid in Cash:

  	
   

  	
  $

  	
  1,250.00

  	
   

  
	
  $

  	
  1,250.00 Commitment Fee (0.5% p.a.)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Charges Paid in Cash:

  	
   

  	
  $

  	
  1,350.00

  	
   

  
							

 

AUTOMATIC PAYMENTS. Borrower hereby authorizes
Lender automatically to deduct from Borrower’s account, numbered

500-431567-1, the amount of any loan payment. 
If the funds in the account are insufficient to cover any payment,
Lender shall not be obligated to advance funds to cover the payment.  At any time and for any reason, Borrower or
Lender may voluntarily terminate Automatic Payments.

 

FINANCIAL CONDITION.  BY SIGNING THIS AUTHORIZATION, BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE
AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER’S
FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT
TO LENDER. THIS AUTHORIZATION IS DATED MARCH 1, 2005.

 

 

THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS
INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A
SEALED INSTRUMENT ACCORDING TO LAW.

 

	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  PRECISION AUTO CARE, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert R. Falconi

  	
  (Seal)

  	
  By:

  	
  /s/ Mark P. Francis,

  	
  (Seal)

  
	
   

  	
  Robert R. Falconi, President of PRECISION AUTO

  CARE, INC.

  	
   

  	
  Mark P. Francis, Controller of PRECISION AUTO

  CARE, INC.

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