PRECISION AUTO CARE INC, 10-K, 1999-09-28

PRECISION AUTO CARE INC
10-K, 1999-09-28
AUTOMOTIVE REPAIR, SERVICES & PARKING

Previous: THURLOW FUNDS INC, 24F-2NT, 1999-09-28

Next: NATIONSCREDIT GRANTOR TRUST 1997-1, 8-K, 1999-09-28

<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 1999
COMMISSION FILE NUMBER 1-14510

PRECISION AUTO CARE, INC.

(Exact name of registrant as specified in its charter)

VIRGINIA 54-184785
(State or other jurisdiction (IRS Employer ID No.)
of incorporation or organization)

748 MILLER DRIVE, S.E.
LEESBURG, VIRGINIA 20175
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 777-9095

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)

Indicate by check mark whether the registrant, (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO __
-

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __

The aggregate market value of the voting stock held by non-affiliates of the
Corporation at September 14, 1999 was $10,187,004 based on the closing price of
$2.00 per share. As of that date, 5,093,502 shares of Common Stock were issued
and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>

TABLE OF CONTENTS

Explanatory Note: Certain information called for by Items 6, 7, 7A, 8 and 14 of
this Annual Report on Form 10-K cannot be obtained on a timely basis by the
Registrant without unreasonable effort or expense. A Form 12b-25 filing is being
made by the Registrant with respect to these Items.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I Item 1. Business 4
Item 2. Properties 12
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 13

PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 13
Item 7A. Quantitative and Qualitative Disclosure about Market Risk 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 14

PART III Item 10. Directors and Executive Officers of the Registrant 14
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners and Management 20
Item 13. Certain Relationships and Related Transactions 21

PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 23
</TABLE>

2
<PAGE>

FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934. When used in this report, the words
"anticipate," "believe," "estimate," "expect," "intend" and "plan" as they
relate to Precision Auto Care, Inc. or its management are intended to identify
such forward-looking statements. All statements regarding Precision Auto Care,
Inc. or Precision Auto Care, Inc.'s expected future financial position, business
strategy, cost savings and operating synergies, projected costs and plans, and
objectives of management for future operations are forward-looking statements.
Although Precision Auto Care, Inc. believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, no assurance can
be given that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements herein include, among
others, the factors set forth under the caption "Business-- Risk Factors,"
general economic and business and market conditions, changes in federal and
state laws, and increased competitive pressure in the automotive aftermarket
services business.

3
<PAGE>

PART I
ITEM 1. BUSINESS

OVERVIEW

Precision Auto Care, Inc. ("Precision Auto Care" or the "Company") is a
provider of automotive maintenance services with franchised and Company-operated
centers located in the United States and in certain international locations. The
Company's services are provided to automobile owners and focus on those high
frequency items required to properly maintain the vehicle on a periodic basis.
The Company offers these services through three "Precision" brands that are
intended to be complementary:

. Precision Tune Auto Care provides automotive maintenance services
which require relatively short service times including engine
performance, oil change and lubrication and brake services. At
June 30, 1999, these services were provided at 542 Precision Tune
Auto Care centers owned and operated by franchisees and one owned
and operated by the Company.

. Precision Auto Wash provides self-service and touchless automatic
car wash services. The advanced operating systems used at
prototype Precision Auto Wash centers permit remote monitoring
and administration of operations. The no-touch car wash
technology employed in Precision Auto Wash centers also provides
a high-quality wash with less risk of vehicle damage than
traditional car wash systems. At June 30, 1999, there were 24
Company-owned car wash centers and 18 franchised car wash
centers.

. Precision Lube Express provides convenient fast oil change and
lube services. Because Precision Lube Express centers consist of
"above ground" configured modular buildings manufactured and sold
by the Company, operations can commence more quickly and with
less capital investment than is the case for many competitors. At
June 30, 1999, there were 14 Precision Lube Express centers owned
and operated by franchisees and six owned and operated by the
Company. As of that date there were also 17 Lube Depot centers
operated by franchisees, some of which are expected to become
Precision Lube Express centers.

The Company supports its franchisees and Company-owned centers by
distributing certain automotive and car washing parts and supplies, and
manufacturing and distributing pre-fabricated modular buildings and car wash
equipment and chemicals.

The Company, a Virginia corporation, was incorporated in April 1997, but
through predecessors has been in the automotive maintenance services business
for over twenty years. The first Precision Tune was established in 1976 to
provide quick, convenient and inexpensive engine tune-ups. Franchising of
Precision Tune centers began the next year. As changes in automotive technology
reduced the need for traditional tune-ups, Precision Tune expanded its menu of
offered automotive maintenance services to include oil changes, fuel injection
service, air conditioning service, cooling system service, brake service and
more diagnostic services. In September 1996, Precision Tune's name was changed
to Precision Tune Auto Care to reflect the shift in emphasis.

The Company is the result of the November 1997 combination of WE JAC
Corporation (the owner of Precision Tune Auto Care) and nine other automotive
maintenance services companies in connection with the Company's initial public
offering (the "IPO Combination"). In March 1998, the Company acquired the holder
of the master franchise agreement for Precision Tune Auto Care in Mexico and
Puerto Rico.

4
<PAGE>

OPERATIONS

PRECISION TUNE AUTO CARE

Precision Tune Auto Care is an automotive maintenance service provider
specializing in quality maintenance services that require relatively short
service times. At June 30, 1999, these services were provided at 542 Precision
Tune Auto Care centers owned and operated by franchisees and one owned and
operated by the Company. The automotive care services provided by Precision Tune
Auto Care centers include the diagnosis, maintenance and repair of ignition
systems, fuel systems, computerized engine control systems, cooling systems,
starting/charging systems, emissions control systems, engine drive train
systems, electrical systems, air conditioning systems, oil and other fluid
systems, and brake systems.

PROTOTYPE CENTER. The current prototype Precision Tune Auto Care center is a
free-standing building with six to eight service bays, two to four of which are
drive-through and include pits to facilitate fast oil change and lubrication
services. Approximately 42% of the Company's existing domestic Precision Tune
Auto Care centers have at least six service bays. Franchisees typically develop
Precision Tune Auto Care centers either by entering into a build-to-suit lease,
under which the landlord constructs the center and leases it to the franchisee,
or by purchasing land and building the facility. The Company typically seeks
sites in commercial areas with a minimum population of 50,000 people within a
five mile radius and 24-hour drive-by traffic of at least 20,000 cars. Exclusive
of real estate, the estimated capital required to open a prototype Precision
Tune Auto Care center ranges from $140,000 to $200,000.

RETAIL MARKETING. Precision Tune Auto Care's marketing objectives at the retail
level are to increase sales, enhance first-time customers' experiences, and
bolster customer retention efforts. To further these objectives, Precision Tune
Auto Care has developed and implemented a marketing plan containing programs and
materials for use by Precision Tune Auto Care centers. The plan includes
targeted marketing programs designed to reach key market segments, in-store
merchandising materials designed to enhance retail sales and first time customer
trials, and other local marketing materials (e.g., second car discounts, service
reminder cards, and ATM receipt coupons) designed to generate customers and
improve customer retention.

TRAINING AND OPERATIONAL SUPPORT. A significant element of Precision Tune Auto
Care's commitment to service is its training program for franchisees. New
franchisees are required to successfully complete 80 hours of initial training
at the Company's national training center in Leesburg, Virginia. The Company
also offers a full line of technical training, including courses on engine
performance, fuel systems and emissions, automotive electronics, fuel injection,
and brake certification. These courses, which include both classroom and
hands-on training, are designed to allow franchisees and service center
technicians to maintain and update their technical capability to service today's
more technically complex vehicles. Upon opening a new center, training crews are
onsite for at least the first two business days to assist in the startup
process.

Management also has developed the Precision Information Network ("PIN"), a
proprietary point of sale computer system, and has made this system available to
franchisees. The latest version of PIN is a Windows-based system which employs
touch-screen technology and is designed to be user friendly. The PIN system
provides reports on productivity, cost of goods, labor, inventory and line of
service information, and includes a marketing database module that facilitates
the tracking of customer information for the development of direct mail
marketing campaigns and other marketing strategies. Remote-location polling of
information and electronic ordering from the Company's parts and equipment
division are features currently under development. Approximately 46% of the
Company's domestic franchised centers have installed a version of the PIN
system.

FRANCHISE MARKETING. The Company (through a Predecessor Company) has marketed
franchises for Precision Tune Auto Care centers since 1977. The Company's
franchise sales process includes advertising in appropriate franchise and
business publications, conducting franchise sales seminars, and maintaining a
home page on the Internet through which interested parties may submit a
franchise inquiry. Prospective franchisees are asked to complete a Confidential
Qualifications Report, which serves as the initial screen to determine whether a
prospect is qualified. The Company seeks individuals with management experience
who will commit full time to the operation of their franchise and who have a
minimum of $50,000 and $150,000 in liquid assets and net worth, respectively.

Precision Tune Auto Care's area development system has played a significant role
in the Company's franchise development efforts. Under this system, Precision
Tune Auto Care has entered into area development agreements that grant area
developers the right and obligation to develop franchises on Precision Tune Auto
Care's behalf within specific geographic regions for stated periods of time.
Franchise agreements within the area are between the Company and the franchisee.
The area developer typically receives up to one-half of the initial franchise
fee, one-half of the subsequent royalty revenues and one-half of franchise
renewal and transfer fees. After the creation of a franchise, the area developer
performs most of Precision Tune Auto Care's franchisor obligations. Generally,
the Company is free to establish and operate Company-owned centers in areas in
which it has granted development rights to area developers. In that event the
Company is required to pay the area developer amounts equal to the royalty
payments that the area developer would otherwise receive if the center was being
operated by a franchisee. As of June 30, 1999, 23 area developers had an
ownership interest in a total of 136 Precision Tune Auto Care centers
(representing 33% of the total number of centers) and provided support to
another 220 centers.

OPEN AREA DEVELOPMENT. Precision Tune Auto Care's current strategy is also to
pursue the direct development of open areas in which area developers have not
been granted rights. To facilitate this strategy, the Company has formed a
franchise development team to pursue Precision Tune Auto Care's open area
development plan. This plan, which includes direct franchising and the
development of Company-owned stores for ultimate sale under the Turnkey Program
discussed below, addresses such factors as market demographics, development
resources (e.g., advertising and public relations vehicles, developers of
commercial real estate), criteria for initial center development, and criteria
for additional center development. Based on these factors, a specific expansion
strategy for each target area is developed. The

5
<PAGE>

Company believes that significant expansion potential exists in areas not
controlled currently by area developers.

PRECISION AUTO WASH

The Company is the owner, operator and franchisor of technologically-advanced
self-service and touchless automatic car wash centers. At June 30, 1999, there
were 24 Precision Auto Wash centers owned and operated by the Company. As of
that date, there were 18 franchised car wash centers.

The Company believes that the Precision Auto Wash system represents the
state-of-the-art in modern touchless automatic and self-service car washing
capabilities.

The computer-based operating system the Company developed for use in its car
wash centers includes the following features:

. Computerized control of the wash system which allows the operator to
change time cycles, and equipment functions, and to monitor the status
of operations, quickly, easily and cost-effectively, from a remote
location on a laptop personal computer.

. The ability for customers to quickly and easily contact a central
national customer help center on a dedicated toll-free number in the
event of an equipment malfunction.

. A frequent wash card system, utilizing bar-code technology, rewards
customers with free washes based upon wash frequency, while collecting
valuable marketing data.

. Through its exclusive integrated voice, LED display and video
instruction features, the system provides the customer with step-by-
step instructions on how to operate the system.

. A grace period feature permits the customer to continue the wash cycle
by inserting additional quarters after his or her initial time has
expired.

. A bonus time feature allows customers more time per coin during off-
peak hours.

PROTOTYPE CENTER. There are two types of prototype Precision Auto Wash centers:
(i) the "Classic," a stand-alone facility consisting of one automatic and four
self-service car wash bays; and (ii) the "Junior," a one-bay automatic car wash
facility to be located on the same site as a Precision Tune Auto Care center or
a Precision Lube Express center. The "Classic" Precision Auto Wash Center is
designed to be placed on a half-acre lot. Exclusive of real estate, the
estimated initial investment to open a "Classic" Precision Auto Wash center
ranges from $52,600 to $669,000. The initial investment required for a "Junior"
Precision Auto Wash, exclusive of real estate, ranges from $40,100 to $420,500.

RETAIL MARKETING. The Company believes that Precision Auto Wash will enjoy
significant benefits from consumer recognition of the "Precision" brand name. At
present, marketing initiatives at the retail level include (i) a grand opening
ceremony to publicize the opening of each new center, (ii) frequent usage/swipe
card system to encourage repeat business, (iii) direct mail marketing, (iv)
quarterly newsletter publication and distribution to customers, (v) advertising
on the back of grocery store receipts, (vi) customer appreciation days, and
(vii) fleet account solicitation.

TRAINING AND OPERATIONAL SUPPORT. A three-day formal pre-opening training
program is required for all Precision Auto Wash franchisees prior to the opening
of a center. Precision Auto Wash provides its franchisees with an operations
policy and procedures manual, and performs a thorough center evaluation on a
quarterly basis. Precision Auto Wash centers participate in "mystery shopper"
and customer service programs. Field operations, marketing and training support
are provided by Company personnel.

FRANCHISE MARKETING. Prospective Precision Auto Wash franchisees are recruited
and granted franchises in accordance with the same processes and techniques that
are used to recruit and license prospective Precision Tune Auto Care
franchisees. As a method of capturing the market of existing car wash owners,
this past fiscal year the Company began a program for existing car wash owners
to participate in the various benefits and supports offered by the Precision
Auto Wash system at reduced fees. Area developers who agree to become a
Precision Auto Wash area developer in their territory are paid a portion of the
initial franchisee fee and continuing royalty in consideration for assisting in
the development and ongoing support of a Precision Auto Wash center. It is
anticipated that Precision Auto Wash franchisees generally will purchase
equipment manufactured by the HydroSpray Car Wash Equipment Co., Ltd.
("HydroSpray") and Worldwide Drying Systems, Inc. ("Worldwide"), subsidiaries of
the Company, and the operational system package from the Company.

PRECISION LUBE EXPRESS

Precision Lube Express is the owner, operator and franchisor of centers which
provide fast automobile oil change, lubrication, filter replacement and related
basic services. Precision Lube Express centers also check and fill vital fluids,
and conduct vehicle safety inspections, including inspection of exhaust systems.
Precision Lube Express offers its customers air filters, PCV valves, breather
filters, wiper blades and assorted engine additives. Precision Lube Express
centers top off vital fluids between customer's oil changes at no charge. At
June 30, 1999, there were 14 Precision Lube Express centers owned and operated
by franchisees and 6 owned and operated by the Company. As of that date

6
<PAGE>

there were also 17 Lube Depot centers operated by franchisees, some of which are
expected to become Precision Lube Express centers.

The Company believes that the "above-ground" configuration of the modular
Precision Lube Express building manufactured and sold by the Company enables
Precision Lube Express operators to commence operations more quickly and with
lower levels of initial investment than many of its competitors. Unlike
traditionally constructed fast oil change and lube centers which include an
in-ground service pit, the Company's modular centers can be relocated or
expanded quickly. In addition, the modular Lube Express building can be located
on a relatively small piece of property. Unlike certain of its competitors,
Precision Lube Express centers generally do not perform differential fluid
changes, radiator flushes or other automotive maintenance or repair work.
Accordingly, the Company believes that this enables Precision Lube Express
operators to provide services more inexpensively than their competitors because
Precision Lube Express operations require less skilled labor. Because the
Precision Lube Express building is modular and relatively small, it can
sometimes be located on the same site as a Precision Auto Wash center, as well
as other retail locations.

Precision Lube Express marketing emphasizes the basic "hassle-free" fast oil
change and lube services provided by Precision Lube Express.

PROTOTYPE CENTER. The prototype Precision Lube Express Center consists of a one
or two bay unit. The size of the site will depend on the size of the center,
with 50 feet by 100 feet the minimum required for a one-bay unit. Exclusive of
real estate, the estimated initial investment to open a Precision Lube Express
prototype Center ranges from $132,000 to $253,000.

RETAIL MARKETING. The Company believes that Precision Lube Express will enjoy
significant benefits from consumer recognition of the "Precision" brand name.
The Company believes retail sales should be further stimulated by cross
marketing opportunities generated through Precision Lube Express's association
with Precision Tune Auto Care and Precision Auto Wash.

Specific marketing initiatives at the retail level include (i) VIP cards,
granting customers special rates and other benefits, (ii) point-of-sale
marketing materials, including frequent usage cards that provide customers with
free oil changes to encourage repeat business, (iii) radio and print media
advertising, and (iv) direct mail marketing.

TRAINING AND OPERATIONAL SUPPORT. Precision Lube Express provides a one-week
training program that franchisees are required to complete successfully before
opening a Precision Lube Express center. The program addresses the following
areas: computer system operations, lubrication equipment training, center
operations, customer service, and advertising.

The Company actively supports its Precision Lube Express franchisees. Each
center receives operational visits similar to Precision Tune Auto Care centers
and are included in mystery shopper and customer service programs. Field
operations, marketing and training support are provided using the existing
Precision Tune Auto Care structure, with area developer personnel or corporate
personnel, as applicable.

FRANCHISE MARKETING. Prospective Precision Lube Express franchisees are
recruited and granted franchises in accordance with the same processes and
techniques that are used to recruit and license prospective Precision Tune Auto
Care franchisees.

MANUFACTURING AND DISTRIBUTION

The Company's manufacturing and distribution operations account for a
significant portion of the Company's revenues. As more fully described below,
these operations allow the Company to promote uniform quality of supplies and
equipment used in each "Precision" center. The Company does not rely heavily on
any single supplier for the supply of any materials, such as oil, equipment or
raw materials or components the Company utilizes in its manufacturing
operations.

PRECISION TUNE AUTO CARE. Precision Automotive Components ("PAC") is a
distributor of automotive parts and equipment located in Winchester, Virginia.
PAC currently sells a complete line of quality ignition parts, oil and air
filters, brake parts, diagnostic equipment, signage, and other items necessary
and incidental to the outfitting and operation of Precision Tune Auto Care
centers as well as oil and air filters, spare parts and other supplies to
Precision Lube Express centers and Precision Auto Wash centers.

PRECISION AUTO WASH. HydroSpray, a Company subsidiary, manufactures, distributes
and sells the car wash equipment used in the Precision Auto Wash system. The
Company believes that the HydroSpray equipment package is a leading car wash
equipment package on the market because it includes such unique features as an
integrated computer system that controls the auto wash system and allows remote
dial-in access for system status reports and the diagnosis of maintenance
problems along with its recently redesigned automatic tower and track which
adjusts to the size of each vehicle. HydroSpray will sell equipment to Precision
Auto Wash franchisees and to other third parties for installation in car wash
centers that are not franchised or otherwise affiliated with Precision Auto
Wash. HydroSpray's operations principally include the assembly of parts that
have been manufactured by suppliers to HydroSpray specifications. This assembly
process is conducted at HydroSpray's 40,000 square foot manufacturing facility
located in Cedar Falls, Iowa.

National Auto Chemicals blends and distributes the chemical solutions used in
Precision Auto Wash centers including the "Mean Green" presoak and other
solutions of the type which are required in the Precision Auto Wash system.
National Auto Chemicals makes its chemicals and supplies available to Precision
Auto Wash franchisees and other third parties who are not franchisees or
otherwise affiliated with Precision Auto Wash.

Worldwide manufactures and distributes drying systems for installation in
automatic car washes. Worldwide's dryers are available to

7
<PAGE>

Precision Auto Wash franchisees and other third parties who are not franchisees
or otherwise affiliated with Precision Auto Wash. Worldwide's operations are
conducted out of a 9,600 square foot leased plant outside Denver, Colorado.

PRECISION LUBE EXPRESS. Precision Building Solutions Incorporated ("PBSI")
manufactures and installs the modular building and equipment system used by
Precision Lube Express centers. PBSI conducts these manufacturing operations at
a 27,000 square foot facility located in Mansfield, Ohio. PBSI also sells its
modular buildings to third parties for various commercial applications. The
buildings are delivered, installed, field-tested, and outfitted with all of the
supplies and tools necessary to commence operations immediately. Most
installations are complete within three to five business days from the date of
receipt, thus providing competitive time and cost advantages over traditional
construction. PBSI purchases parts from third-party suppliers which are
manufactured to the PBSI's specifications.

The Company is not dependent upon any single supplier and the parts and
materials the Company uses in connection with its manufacturing process can be
obtained from a variety of suppliers.

FRANCHISING ACTIVITIES

PRECISION TUNE AUTO CARE. The Company sold 4 Precision Tune Auto Care centers to
franchisees under its Turnkey Program in the year ended June 30, 1999. As of
June 30, 1999, substantially all of the Company's Precision Tune Auto Care
centers were owned and managed by franchisees. Precision Tune Auto Care's
franchises have been sold during the preceding years under franchise agreements
that vary in detail as the Precision Tune Auto Care's franchise program has
evolved. Royalty rates in existing franchise arrangements range from 6% to 7.5%.
Currently, the Precision Tune Auto Care's standard franchise agreement requires
payment to the Company of an initial franchise fee of $25,000 and a continuing
royalty of 7.5% of weekly gross receipts. In addition, the franchisee is
required to contribute to or expend 9% of weekly gross receipts on advertising,
1.5% of which is currently paid into the national advertising fund and 7.5% of
which is spent locally. The current standard form franchise agreement has an
initial term of ten years and provides for five year renewal options.

The Company has implemented a program under which qualified franchisees are
eligible to have their royalty rate reduced to 6% if they satisfy certain
criteria. Under the program, franchisees are also provided with an incentive to
purchase additional Precision Tune Auto Care franchises. Any franchisee who has
owned and operated a center for at least one year in accordance with this
program will be charged an initial franchise fee of $15,000 for a second
franchise and $10,000 for each additional franchise purchased, provided certain
conditions are met.

Under its current form of franchise agreement, the Company has a continuing
obligation to provide technical and administrative support, supervisory
services, centralized advertising, and training and related support to its
franchisees. In certain regions, the Company has delegated these duties to area
developers under its area developer system.

Upon non-renewal and transfer, the Company has the first right to purchase the
operating assets and obtain an assignment of leased facilities in certain cases.
In certain situations, the Company will repurchase franchise rights. The
decision to repurchase is made solely at the Company's discretion and is not a
contractual obligation. The Company also periodically obtains possession of some
franchisees' franchise rights by exchanging for such rights notes payable or
other consideration, or by exercising rights outlined in the Franchise
Agreements.

The Company also enters into master franchise agreements to develop
international markets. At the present time, the Company has master franchise
agreements in Taiwan, Singapore, Indonesia, Oman, the Bahamas, Curacao/Aruba,
Jamaica, the Dominican Republic, St. Croix, Peru, Brazil and El Salvador.
Generally, the master franchisee pays a license fee and is required to develop
Precision Tune Auto Care centers in accordance with an agreed upon schedule
within the defined area. Franchise agreements within the area are between the
master franchisee and the unit franchisee. The master franchisee is required to
perform all of the obligations of the franchisor including training,
administrative and operational support, and the Company generally receives 20%
of the initial franchise fee and up to one-third of ongoing royalty fees.

PRECISION AUTO WASH. The Company sold 11 car wash centers to franchisees under
its Turnkey Program in the year ended June 30, 1999. The Company is also
aggressively marketing Precision Auto Wash franchises. The standard franchise
agreement for Precision Auto Wash franchisees will require the payment of an
initial franchise fee between $1,500 and $15,000 depending upon whether or not
the franchisee is an existing car wash owner. Franchisees will be required to
pay royalties on a yearly basis between $4,000 and $9,000

Franchisees may also be required to contribute a monthly amount between $75 and
$150 to a national advertising fund and an additional amounts to a local
advertising cooperative. In addition, a franchisee will receive franchise
protection within a specified area. Precision Auto Wash franchise agreements
have an initial term of ten years and provide for five-year renewal options.

PRECISION LUBE EXPRESS. The Company sold 1 lube center to a franchisee under its
Turnkey Program in the year ended June 30, 1999. The standard franchise
agreement for Precision Lube Express franchisees requires the payment of an
initial franchise fee of $12,500. Franchisees are required to pay continuing
royalties of 5% of weekly gross receipts. Precision Lube Express franchisees
also are required to contribute an amount equal to 2% of their monthly gross
receipts to a national advertising fund and an additional amount of their gross
receipts royalties to a local advertising cooperative. The franchise agreements
have an initial term of ten years and provide for five-year renewal options.
Certain Precision Lube Express franchise agreements (namely those inherited in
connection with the IPO Combination) have terms that vary with the standard
agreement now in use.

PRECISION TURNKEY PROGRAM. In addition to the direct franchising activities
discussed above, pursuant to which franchisees select a site and subsequently
develop a Precision Auto Care center on the site, the Company operates a
Precision Turnkey Program. Under this

8
<PAGE>

program, franchisees purchase either existing Company-owned centers or recently-
developed centers from the Company. At the time the franchisee purchases the
center, the franchisee also purchases a franchise license (pursuant to which the
franchisee agrees to pay royalties to the Company on the same basis as
franchisees who execute the Company's current standard form of franchising
agreement) as well as the center's assets and goodwill. The program is designed
to enhance franchising sales by providing readily available and immediately
operational sites of Company-selected locations.

COMPETITION

The Company encounters competition in all aspects of its business, including the
sale by Precision Tune Auto Care, Precision Auto Wash and Precision Lube Express
centers of automotive maintenance and repair services, self-service and
automatic car wash services and fast oil and lubrication services, respectively.
The Company believes that automobile dealerships, including recently emerging
national and regional new and used auto dealerships, represent Precision Tune
Auto Care's principal competitors. Other Precision Tune Auto Care competitors
include tire companies and regional under-the-hood service specialists. National
competitors within Precision Tune Auto Care's market include Sears Auto Center
and the automotive maintenance centers operated by Goodyear, Firestone and
Penske, among others. Its regional competitors include All Tune and Lube (East
Coast), EconoLube and Tune (West Coast), Tunex International, Inc. (Rocky
Mountain region), Tune-Up Masters and Speedee Oil Change and Tune-Up (Southern
region), among others. The Company believes that the greater technical
complexity of today's vehicles provides a substantial barrier to entry for
competitors in the "under-the-hood" segment of the automotive care services
industry.

Precision Auto Wash competes not only with other self-service automobile car
washes but with car wash services provided by full-service tunnels, exterior
only tunnels, hand washes, oil company washes, and do-it-yourself car washing.

Precision Lube Express also competes in the service segment of the automotive
aftermarket industry. According to the American Oil Change Association, an
estimated 650 million oil changes are performed annually in cars and light
trucks. These oil changes are performed by individuals or are performed
professionally. Professional oil changes are performed in all types of
automotive aftermarket outlets including fast oil change and lubrication
facilities such as those operated by the Company, car dealerships, and gasoline
stations. On a national level, Precision Lube Express competes with a number of
major oil manufacturers dominating the fast lube market. These include Pennzoil
Company (Jiffy Lube International, Inc. and Q-Lube Inc.), Valvoline
Company/Ashland Oil Inc. (Instant Oil Change) and Texaco Inc. (Express Lube),
among others. In addition, Precision Lube Express competes with regional fast
oil and lubrication operations including All Tune and Lube, EconoLube and Tune,
Tunex International Inc. and Speedee Oil Change and Tune-Up, among others.

The Company believes that the Precision Tune Auto Care, Precision Auto Wash and
Precision Lube Express centers all compete on the basis of customer awareness
through advertising, service, convenience and location and, to a lesser extent,
on price. The Company believes that the potential ability to offer all of the
services provided by each of the operations at one center or in centers in close
proximity to one another will be a significant competitive advantage.

The Company's HydroSpray subsidiary competes with many other manufacturers of
self-service and touchless automatic car wash equipment manufacturers. Many of
these competitors are larger and well-established. The Company's competitors
include, but are not limited to, Mark VII Industries, Inc., Ryko, PDQ and many
smaller businesses. Some of these companies are well capitalized and have long
standing relationships with large oil companies who frequently purchase their
equipment for installation at car washes located on or adjacent to gasoline
stations.

GOVERNMENTAL REGULATION

FRANCHISING REGULATION. The Company is subject to federal, international and
state laws and regulations, including the regulations of the Federal Trade
Commission as well as similar authorities in individual states, in connection
with the offer, sale and termination of franchises and the regulation of the
franchisor/franchisee relationship. The failure by the Company to comply with
these laws could subject the Company to liability to franchisees and to fines or
other penalties imposed by governmental authorities. From time to time, the
Company experiences periods during which sales are restricted while it registers
updates of its disclosure material with various states. Such delays may have an
adverse effect on the Company's ability to offer and sell franchises. In
addition, the Company may become subject to litigation with, or other claims
filed with state, federal or international authorities by, franchisees or area
developers based on alleged unfair trade practices, implied covenants of good
faith and fair dealing or express violations of agreements. Accordingly, the
failure of the Company to comply with applicable franchise laws and regulations
could have a material adverse effect on the Company's financial condition and
results of operations.

ENVIRONMENTAL REGULATION. Precision Tune Auto Care and Precision Lube Express
centers store new oil and handle large quantities of used automotive oils and
fluids. Precision Auto Wash centers use chemicals in the washing process. These
chemicals, along with oils, fluids and other chemicals washed off of the vehicle
are collected with the waste water from the car wash process. As a result of
these activities, the Company, its franchisees and area developers are subject
to various federal, state and local environmental laws and regulations dealing
with the transportation, storage, presence, use, disposal and handling of
hazardous materials and hazardous wastes, discharge of stormwater, and
underground fuel storage tanks. If any such substances were improperly released
or improperly stored on the Company's property or the property of any
franchisee, including leased properties, or if the Company were found to be in
violation of applicable environmental laws and regulations, the Company could be
responsible for clean-up costs, property damage and fines or other penalties,
any one of which could have a material adverse effect on the Company's financial
condition and results of operations.

TRADEMARKS

9
<PAGE>

The Company has registered (subject to certain limited exceptions) a number of
trademarks and service marks with the United States Patent and Trademark Office,
including "Precision Tune Auto Care," "Precision Auto Wash" and "Precision Lube
Express." The Company's failure to obtain trademark and service mark
registration could have a material adverse effect on the Company's operations.
The Company has also registered and made application to register trademarks in
foreign countries where master franchise licenses have been granted.

SEASONALITY

Seasonal changes may impact various sectors of the Company's businesses and,
accordingly, the Company's operations may be adversely affected by seasonal
trends in certain periods. In particular, severe weather in winter months may
make it difficult for consumers in affected parts of the country to travel to
Precision Tune Auto Care, Precision Lube Express and Precision Auto Wash centers
and obtain services. Severe winter weather and rainy conditions also can
adversely impact the Company's sale, installation and use of car wash equipment.
Conversely, the Precision Auto Wash business is favorably impacted by less
severe winter weather conditions as demand for the Company's car wash service
increases substantially in winter months.

RISK FACTORS

The Company's business and an investment in its Common Stock are subject to
certain risks, including the following:

LIMITED OPERATING HISTORY. The Company is in only its second year of operations
as a combined entity. While a predecessor of the Company has been in business
since 1976, the Company as currently constituted, acquired the majority of its
assets in November 1997 as the result of a combination of nine automotive
maintenance services companies in connection with its initial public offering.
There can be no assurance that the Company's management will be able to
successfully manage the operations of the combined entity.

COMPETITION. The automotive services industry is highly competitive. Direct
competitors exist for each of the Company's businesses, Precision Tune Auto
Care, Precision Auto Wash, Precision Lube Express and the Company's
manufacturing and distribution divisions and subsidiaries.

The Company believes that automobile dealerships, including recently emerging
national and regional new and used auto dealerships, represent the principal
competitors for Precision Tune Auto Care and Precision Lube Express; however,
the Company also competes with national and regional fast oil change and lube
companies, major oil manufacturers, local service stations, and local, regional
and national automobile maintenance and repair service providers. See
"Business--Competition". Competitors for the services provided by Precision Auto
Wash include regional and local car wash operators. The Company believes the
principal competitive factors in the markets serviced by each of its business
units are location, name recognition and reputation, quality of service and
price.

The Company also competes with some of those noted above and with other parties
in the sale of franchises. Competitive factors include startup costs, royalty
rates, franchisee support and the financial performance of existing centers.
With respect to the sales of supplies and equipment for franchisees, competition
is based on availability, price, ability to provide prompt delivery and the
quality of support services.

The Company's manufacturing and distribution division competes with a number of
manufacturers and distributors of automotive and car wash supplies and
equipment. Many of these competitors are large and have a substantially longer
operating history than the Company. In addition, although the Company does not
intend to sell its complete proprietary automated car wash system to
unaffiliated car wash centers, the Company sells certain car wash equipment to
car wash centers unaffiliated with the Company. The sale of car wash equipment
to unaffiliated car wash centers could increase the level of competition in the
Company's car wash business, allow the Company's competitors to compete more
effectively with the Company or reduce the Company's ability to distinguish
itself from its competitors. See "Business--Operations--Manufacturing and
Distribution."

Certain competitors in each of the areas discussed above have greater financial
resources than the Company, and there can be no assurance that the Company or
individual Precision centers will be able to compete effectively. See
"Business--Competition."

10
<PAGE>

RELIANCE ON FRANCHISING. Franchise royalties are a significant component of the
Company's revenue base. Therefore, the Company depends upon the ability of its
franchisees to promote and capitalize upon the "Precision" brand and the
reputation the Company believes it enjoys for quality and value. There can be no
assurance that the Company or its area developers will be able to recruit and
retain franchisees with the business abilities or financial resources necessary
to open Precision Tune Auto Care, Precision Auto Wash and Precision Lube Express
centers on schedule or that the franchisees will conduct operations profitably.
In addition, to the extent that franchisees finance their operations with
secured indebtedness, the Company's rights to receive franchise royalties would
be effectively subordinated to the rights of franchisees' lenders. See
"Business--Operations."

AUTOMOTIVE TECHNOLOGY ADVANCES. The demand for the services offered by the
Company's Precision Tune Auto Care and Precision Lube Express centers could be
adversely affected by continuing developments in automotive technology.
Automotive manufacturers are producing cars that last longer and require service
and maintenance at less frequent intervals. For example, some manufacturers now
recommend that consumers change oil at 10,000 mile intervals and replace spark
plugs and other engine components at 100,000 miles, a significant increase from
the mileage intervals recommended for earlier models and those currently
recommended by most manufacturers. The demand for the Company's services also
could be adversely affected by longer and more comprehensive warranty programs
offered by automobile manufacturers. The Company believes that a majority of new
automobile owners have their cars serviced by a dealer during the period the car
is under warranty. In addition, advances in automotive technology may require
the Company to incur additional costs to update its technical training program
and upgrade the diagnostic capabilities of its centers.

LABOR AVAILABILITY. The provision of high quality maintenance services by
Precision Tune Auto Care centers requires an adequate supply of skilled labor.
In addition, the operating costs and operating revenues of such centers may be
adversely affected by high turnover in skilled technicians. Trained and
experienced automotive technicians are in high demand. Accordingly, a center's
ability to increase productivity and revenues could be affected by its inability
to maintain the employment of skilled technicians necessary to provide the
center's services. There can be no assurance that Precision Tune Auto Care or
its franchisees will be able to attract and maintain an adequate skilled labor
force necessary to efficiently operate these centers or that labor expenses will
not increase as a result of a shortage in the supply of skilled technicians,
thereby adversely impacting the Company's financial performance.

DEPENDENCE ON MANAGEMENT AND KEY PERSONNEL. The Company's success depends to a
significant extent on the performance and continued services of senior
management and certain key personnel. The Company believes these individuals
possess the necessary experience in acquiring, integrating, developing,
financing and operating the various types of Precision Auto Care centers and the
Company's related franchising and manufacturing and distribution activities, as
well as managing a company intending to implement an aggressive acquisition
program. The loss of the services of one or more of these key employees could
have a material adverse impact on the Company's financial condition and results
of operations. The Company has employment agreements with certain key
executives. Each of the employment agreements contains certain noncompetition
provisions that survive the termination of employment in certain circumstances.
The Company also has obtained certain noncompetition agreements from several
other members of management and key personnel who are not subject to employment
agreements. However, there can be no assurance that such noncompetition
agreements will be enforceable.

RELIANCE ON AREA DEVELOPERS. The Company relies, in part, on the assistance of
area developers to identify and recruit franchisees, to assist in the
development of a center, and to support franchisees' continuing operations. Most
area development agreements specify a schedule for opening the respective
"Precision" centers in the territory covered by the agreement. In the past, the
Company has selectively agreed to extend or waive the development schedules for
certain of its area developers and there can be no assurance that area
developers will be able to meet their contractual development schedules.
Although the Company also has added the resources to directly franchise in open
areas, the development schedules of the Company's area developers will remain a
part of the basis of the Company's expectations regarding the number and timing
of new center openings.

The Company will depend on its area developers to promote the Precision Tune
Auto Care, Precision Auto Wash and Precision Lube Express franchises in their
territories. The Company initially encountered some resistance to the
introduction of the Precision Auto Wash and Precision Lube Express brands. For
example, some area developers resisted the Company's efforts to offer Precision
Lube Express franchises or open Company-owned centers in areas covered by
Precision Tune Auto Care area subfranchisor agreements.

The Company believes that its area developers and the Company have substantially
resolved any concerns expressed by its area developers. There can be no
assurance, however, that the Company will not become subject to legal
proceedings or otherwise expend Company resources in connection with disputes
concerning the Company's ability to offer and sell Precision Lube Express and
Precision Auto Wash franchises or open Company-owned centers in areas covered by
Precision Tune Auto Care area subfranchisor agreements. It also may be difficult
for the Company to enforce its area subfranchisor agreements or to terminate the
rights of area subfranchisors who fail to meet development schedules or other
standards and requirements imposed by the Company, limiting the ability of the
Company to develop the territories of such subfranchisors. Any such disputes or
difficulties could increase the costs of the Company's operations or otherwise
adversely affect the Company's financial condition and results of operations.
See "Business--Operations."

SEASONAL NATURE OF PORTIONS OF THE BUSINESS. Seasonal changes may impact various
sectors of the Company's businesses and, accordingly, the Company's operations
may be adversely affected by seasonal trends in certain periods. In particular,
severe weather in winter months may make it difficult for consumers in affected
parts of the country to travel to Precision Tune Auto Care, Precision Lube
Express and Precision Auto Wash centers and obtain services. Severe winter
weather and rainy conditions also can adversely impact the Company's sale,
installation and use of car wash equipment. Conversely, the Precision Auto Wash
business is favorably impacted by less severe winter weather conditions as
demand for the Company's car wash service increases substantially in winter
months.

11
<PAGE>

CONTROL BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS. As of September 14, 1999,
directors of the Company, executive officers of the Company, and shareholders
beneficially-owning more than 5% of the Company's outstanding Common Stock, in
the aggregate beneficially owned approximately 63% of the Company's outstanding
Common Stock. Accordingly, these persons have substantial influence over the
affairs of the Company, including the ability to influence the election of
directors, the outcome of votes by the Company's shareholders on major corporate
transactions, including mergers, sales of substantial assets, acquisitions and
going-private transactions, and other matters requiring shareholder approval.

FRANCHISING REGULATION. The Company is subject to federal, international and
state laws and regulations, including the regulations of the Federal Trade
Commission as well as similar authorities in individual states, in connection
with the offer, sale and termination of franchises and the regulation of the
franchisor/franchisee relationship. See "Business--Government Regulation." The
failure by the Company to comply with these laws could subject the Company to
liability to franchisees and to fines or other penalties imposed by governmental
authorities. From time to time, the Company experiences periods during which
sales are restricted while it registers updates of its disclosure material with
various states. Such delays may have an adverse effect on the Company's ability
to offer and sell franchises. In addition, the Company may become subject to
litigation with, or other claims filed with state, federal or international
authorities by, franchisees or area developers based on alleged unfair trade
practices, implied covenants of good faith and fair dealing or express
violations of agreements. Accordingly, the failure of the Company to comply with
applicable franchise laws and regulations could have a material adverse effect
on the Company's financial condition and results of operations.

RISKS OF INTERNATIONAL OPERATIONS. International operations comprised
approximately 14% of the Company's consolidated net revenue during the fiscal
year ended June 30, 1999. International operations are subject to risks such as
currency exchange rate fluctuations, unique legal and regulatory requirements,
political and economic uncertainties, difficulties in staffing and managing
foreign operations, differences in financial reporting, differences in the
manner in which different cultures do business, operating difficulties and other
factors. The many difficulties and risks inherent in international operations
could result in a material adverse impact on the Company's business, financial
condition and results of operation.

YEAR 2000 COMPLIANCE. The Company has assessed and will continue to assess the
impact the Year 2000 issue will have on its reporting and operating systems. In
connection with upgrading its operational, financial and management systems, the
Company is in the process of converting its financial and operations software
from a system that the Company believes is not Year 2000 compliant to a
LAN-based system the manufacturer of which has represented is Year 2000
compliant. Although the Company does not anticipate that the Year 2000 issue
will have a significant impact on its business, unanticipated Year 2000
compliance problems of the Company, its vendors or suppliers could potentially
have a material adverse effect on the Company's business, financial condition
and operating results.

ITEM 2. PROPERTIES

The Company's corporate headquarters are located in approximately 24,000 square
feet of leased office space in Leesburg, Virginia pursuant to a lease that
expires in 2002. The Company also leases 32,000 square feet in Winchester,
Virginia pursuant to a lease that expires in 2002. The Winchester facility
houses PAC, which warehouses the parts that are distributed to the Company's
Precision Tune Auto Care operation.

The Company conducts its HydroSpray car wash equipment manufacturing operations
from a 40,000 square foot Company-owned facility located in Cedar Falls, Iowa.

The Company conducts its Worldwide Drying Systems car wash drying equipment
manufacturing operations from a 9,600 square foot leased facility outside of
Denver, Colorado.

The Company conducts its car wash chemical blending and distribution operations
from an 8,000 square foot Company-owned facility located in Columbus, Ohio and
operates its modular building manufacturing facility from a 27,000 square foot
Company-owned building located in Mansfield, Ohio.

The Company believes that the manufacturing facilities described above will
provide the Company with sufficient manufacturing capacity for the foreseeable
future.

The Company's rental obligations on its headquarters and leased warehouse and
manufacturing facilities was approximately $493,700 for the

12
<PAGE>

year ended June 30, 1999. The Company owns the underlying real estate for two
Company-owned car washes and mortgages the underlying real estate for 24
Company-owned centers which includes one auto care center, one lube center, 17
wash centers, and five lube/wash combinations. The rent expense associated with
Company-owned and franchised centers for the year ended June 30, 1999 of
$1,050,000 is the net amount after allowing for $969,000 of sublease income.

In the opinion of management, the Company's current space is adequate for its
operating needs.

ITEM 3. LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to routine litigation in the
ordinary course of business, including contract, franchisee and
employment-related litigation. In the course of enforcing its rights under
existing and former franchisee agreements, the Company is subject to complaints
and letters threatening litigation concerning the interpretation and
applicability of these agreements, particularly in case of defaults and
terminations. None of these routine matters, individually or in the aggregate,
are believed by the Company to be material to its business or financial
condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's common stock, par value $.01 per share ("Common Stock") is
publicly traded on the Nasdaq Stock Market ("Nasdaq") and is quoted under the
symbol "PACI." On August 16, 1999, the Company's listing was moved from the
Nasdaq National Market to the Nasdaq SmallCap Market. The Company's continued
listing on the Nasdaq SmallCap Market is contingent upon Nasdaq approval.

As of September 14, 1999, there were 205 record holders of Common Stock. The
number of record holders was determined from the records of the Company's
transfer agent and does not include beneficial owners of Common Stock whose
shares are held in the names of various securities brokers, dealers and
registered clearing agencies. The Company estimates that there are approximately
1,000 shareholders.

The following table sets forth the high and low sales prices on the Nasdaq for
the Common Stock during the fiscal years ended June 30, 1999 and June 30, 1998,
respectively. To date, the Company has not paid any dividends and does not
anticipate paying any dividends in the foreseeable future. The terms of the
Company's credit agreement also restrict the Company from paying any dividends.

FISCAL YEAR ENDED JUNE 30, 1999

QUARTER HIGH LOW
- ------- ---- ---
First $ 10 3/8 $ 4 5/8
Second 5 7/8 2
Third 3 1 5/8
Fourth 3 1/16 2

FISCAL YEAR ENDED JUNE 30, 1998

QUARTER HIGH LOW
- ------- ---- ---
First* n/a n/a
Second* $ 9 1/16 $ 7
Third 11 8 5/8
Fourth 11 9 3/4

* The Company's Common Stock began trading on the Nasdaq on November 6, 1997.

ITEM 6. SELECTED FINANCIAL DATA

Information responsive to this Item cannot be obtained on a timely basis by the
Registrant without unreasonable effort or expense and is the subject of a Form
12b-25 filing made by the Registrant. The Registrant intends to supply this
information under cover of a Form 10-K/A amendment to this Form within fifteen
calendar days.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

13
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's Articles of Incorporation classifies the Board of Directors into
three classes, as nearly equal in number as possible, with terms which expired
or will expire at the Annual Meetings of Shareholders in 1998, 1999, and 2000
respectively. After the initial rotation is complete, one class of directors
will be elected at each subsequent Annual Meeting of Shareholders to serve
three-year terms.

The terms of four directors will expire at the 1999 Annual Meeting: Messrs.
Allen, Ibrahim, Keller and Zamensky ("Class II Directors"). One Class II
Director, Gerald Zamensky, has decided not to stand for re-election. The Board
of Directors has nominated Mauricio Zambrano V. to serve as a Class II Director.

The Class II Director nominees have been nominated for election for a three-year
term expiring at the Annual Meeting in 2002. The terms of the other eight
directors will continue as indicated below. Dates of service listed below
include service with predecessors of the Company.

DIRECTORS WHOSE TERMS EXPIRE IN 1999
AND NOMINEES FOR TERMS EXPIRING IN 2002

<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION ADDITIONAL INFORMATION
- ---- -------------------- ----------------------
<S> <C> <C>
Woodley A. Allen President, Allen Management Mr. Allen served as Chief Financial Officer of EZ
Director since 1991 Services, Oakton, VA Communications, Inc. from March 1973 to May 1992.
Chairman-Audit Committee (management consulting
Age 52 firm)

Bassam N. Ibrahim(3) Partner, Burns, Doane, From June 1994 to August 1996, Mr. Ibrahim was with Popham,
Director since 1993 Swecker & Mathis, LLP, Haik, Schnobrich & Kaufman. From June 1990 to June 1994, Mr.
Age 37 Alexandria, VA (law firm) Ibrahim was with Mason, Fenwick & Lawrence.

Arthur Kellar(1)(2) Retired Mr. Kellar served as Chairman of the Board of WE JAC
Director since 1991 Corporation, the Company's predecessor, from April 1992 to
Chairman-Organization and September 1994. Mr. Kellar served as Chairman of the Board of
Compensation Committee EZ Communications, Inc. from June 1992 to April 1997.
Age 77

Gerald A. Zamensky Manufacturing Consultant Mr. Zamensky served as a Director of Miracle Industries, a
Director since 1997 (self-employed) predecessor company from 1991 to November 1997. He also served
Age 58 as President and Chief Executive Officer of Southeastern
Plastics, Inc. from 1975 to 1995.

Mauricio Zambrano V. Vice President, Dessarollo Mr. Zambrano serves as a director of Cemex, S.A. de C.V.
New Nominee 1999 Integrado, S.A. de C.V.
Age 53
</TABLE>

DIRECTORS WHOSE TERMS EXPIRE IN 2000

<TABLE>
<S> <C> <C>
Lynn E. Caruthers(3) General Partner, Caruthers Ms. Caruthers has served as Chairperson of the Board of WE JAC
Director since 1991 Properties, Ltd., Corporation, the Company's predecessor, since September 1994.
Chairperson of the Board; Arlington, VA (commercial
</TABLE>

14
<PAGE>

<TABLE>
<S> <C> <C>
Chairperson of the real estate developer)
Executive Committee
Age 47

William R. Klumb Vice President, Mr. Klumb previously served as Vice President of Operations
Director since 1997 Car Wash Division of the Car Wash Division since November 1997. Additional
Age 41 biographic information appears on page 15.

Bernard H. Clineburg(1) President, United Mr. Clineburg served as a Director of George Mason Bankshares,
Director since 1993 Bankshares; Chairman and Inc. and The George Mason Bank from October 1990 to April 1998.
Age 50 CEO, United Bank
(Virginia), Fairfax, VA

Effie L. Eliopulos Owner and operator of Ms. Eliopulos serves as Vice President of National Automotive
Director since 1997 retail rental centers, Chemical. She also served as Chairperson of Miracle Industries
Age 60 Cambridge, OH Inc., a predecessor company, from 1991 to November 1997.

</TABLE>

DIRECTORS WHOSE TERMS EXPIRE IN 2001

<TABLE>
<S> <C> <C>
Charles L. Dunlap(1) President and Chief Mr. Dunlap previously served as President, Chief Operating
Director since 1998 Executive Officer Officer and Director of Crown Central Petroleum Corporation.
Age 56 Additional biographic information appears on page 15.

Richard O. Johnson President, JJ-AGRO, Inc., Mr. Johnson serves as a Director of the following companies:
Director since 1997 Zanesville, OH (farming and First National Bank of Zanesville, National Gas and Oil
Age 71 farm services) Company, and Muskingun Livestock, Inc.

Harry G. Pappas, Jr.(2) Chief Financial Officer, Mr. Pappas operated his own financial consulting firm between
Director since 1996 Partners First Holdings, July 1992 and November 1997. He served as Chief Financial
Age 52 LLC, Linthicum, MD (credit Officer of WE JAC Corporation, the Company's predecessor, from
card company) February 1997 to May 1997. Mr. Pappas served as Chief Financial
Officer of Youth Services International, Inc. from September
1994 to May 1995 and Chief Financial Officer of Meridian
Healthcare from July 1993 to May 1994. He currently serves as a
Director of Creditrust Corporation.

George A. Bavelis(1) Chairman, President and Mr. Bavelis has served as Chairman and President of Coin Op.
Director since 1997 Chief Executive Officer, Vending Co. since 1983. He also serves as Chairman of the Board
Age 62 Pella Co., Columbus, OH of Sterling Bancorp and a Director of Heartland Bancorp.
(real estate development
firm)
</TABLE>

(1) Member -- Executive Committee
(2) Member -- Finance and Audit Committee
(3) Member -- Organization and Compensation Committee

EXECUTIVE OFFICERS OF REGISTRANT

CHARLES L. DUNLAP, age 56, was named President and Chief Executive Officer in
October 1998, and has been a member of the Board of Directors from that date.
From April 1997 until October 1998, Mr. Dunlap was an independent business
consultant. From June 1996 to October 1998, Mr. Dunlap served as a director of
the Clipper Group, a wholly-owned subsidiary of Credit Suisse -- First Boston.
Mr. Dunlap also served as an advisor to the Chairman of the Board of the Clipper
Group regarding the merger of TruckStops of America and National
Auto/Truckstops. From 1991 to 1996, he served as President, Chief Operating
Officer and a Director of Crown Central Petroleum, a petroleum refiner and
retail marketer with annual revenues of approximately $1.8 billion.

JERRY L. LITTLE, age 53, was named Senior Vice President and Chief Financial
Officer in May 1999. From 1982 to May 1999, Mr. Little was the President and
owner of J.L. Little, Inc. in Clifton, Virginia., a consulting firm performing
financial, business and tax advisory services to a variety of businesses.

WILLIAM R. KLUMB, age 41, was named Vice President of the Car Wash Division in
June 1999. Previously, Mr. Klumb was Vice President Car Wash Operations of WE
JAC Corporation, the Company's predecessor, from November 1997 through May 1999.
He had been President of Rocky Mountain I since March 1987 and President of
Rocky Mountain II since it was incorporated in September 1988. He also served as
Managing Member of Ralston Car Wash Ltd. since its formation in 1991. Each of
these entities became wholly-owned subsidiaries of the Company as a result of
the IPO Combination in November 1997.

JAIME J. VALDES, age 41, was named Senior Vice President -- Latin America in
April 1998. From July 1992 until March 1998, Mr. Valdes was the Operating
Partner of Promotora de Francquicias Praxis S.A. de C.V., the Precision Tune
Auto Care master franchisee for Mexico and Puerto Rico.

15
<PAGE>

JOHN T. WIEGAND, age 37, became Vice President of North American Operations in
June 1998. Mr. Wiegand joined WE JAC Corporation, the Company's predecessor, as
Director of Field Operations in August 1996. From January 1990 through August
15, 1996, Mr. Wiegand was Director of Sales and Product Management for Precision
Automotive Components Manufacturing and Distribution (PAC), a division of the
Company.

KEVIN B. ROONEY, age 37, was named Vice President of Franchise Development in
July 1997. Mr. Rooney joined WE JAC Corporation, the Company's predecessor, as
Director of Franchise Development and Marketing in April 1997. From December
1995 to April 1997, Mr. Rooney was Executive Director of Franchise Development
for Decorating Den Systems, Inc. in Bethesda, MD. He joined Decorating Den
Systems, Inc. as District Manager in 1988 and was later named National Division
Manager in April 1994.

PETER TAHINOS*, age 40, was named Vice President of Marketing and Advertising in
September 1997. Mr. Tahinos joined WE JAC Corporation, the Company's
predecessor, as Director of Marketing and Advertising in October 1992. From July
1991 to September 1992, Mr. Tahinos served as an Account Supervisor with the
advertising agency, Weinstock, White & Associates in Philadelphia, PA. Before
that, Mr. Tahinos spent nearly 6 years with MARC Advertising, an advertising
agency located in Pittsburgh, Pennsylvania.

ELIOT G. BOWYTZ, age 31, was named Corporate Secretary in April 1999. Mr. Bowytz
was named Assistant General Counsel in February 1996. Mr. Bowytz joined WE JAC
Corporation, the Company's predecessor, as Staff Attorney in May 1995. From
November 1993 to May 1995, he was Manager of Capital Market Projects for the
Aries Group, LTD., in Arlington, Virginia

JOHN N. TARRANT, age 31, was named Controller in April 1999. Mr. Tarrant joined
WE JAC Corporation, the Company's predecessor, as Financial Analyst in September
1996. From April 1996 until September 1996, he was the Financial Analyst for LCI
International in McLean, Virginia. From July 1995 until April 1996, he was an
Accountant for Rosenblum, Gloss, Niad & Dietz in Rockville, Maryland. From May
1993 until June 1995 he was an Analyst for Joseph & Pietrafesa in Syracuse, New
York.

KARL W. BYRER, age 53, was named Vice President of Business Development in
January 1999. Prior to that, he was Vice President of Car Wash Development, a
position he assumed with the merger and formation of the Company. From November
1989 until the merger in 1997, he was owner and president of the Karl Byrer
Group, a Denver car wash consulting and equipment supply company.

* Mr. Tahinos has recently submitted his resignation effective October 1, 1999.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers to file reports of ownership and
changes of ownership with the SEC and the Nasdaq Stock Market. The Company
believes that during the period from July 1, 1998 through June 30, 1999, its
directors and executive officers complied with all applicable Section 16(a)
filing requirements, except as follows: (i) initial Form 3's for Messrs.
Wiegand, Tahinos, Little, Byrer, Marshall, Rooney, Tarrant, Leslie and Bowytz as
newly appointed executive officers were not filed on a timely basis; (ii)
Messrs. Allen, Bavelis, Caruthers, Clineburg; Ibrahim, Johnson, Kellar, Pappas,
and Zamensky, each a director of the Company, was delinquent in reporting the
grant of a restricted stock award on Form 4; (iii) Messrs. Dunlap, Klumb,
Wiegand and Tahinos, each an executive officer of the Company, was delinquent in
reporting the grant of a restricted stock award on Form 4; (iv) Ms. Eliopulos
and Messrs. Kellar and Bavelis, each a director of the company, was delinquent
in reporting the grant of a restricted stock option on Form 4; and (v) Form 5's
for each of the Company's directors and executive officers were not filed on a
timely basis.

16
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below sets forth the compensation earned and paid to each Named
Executive Officer (including certain former executive officers of the Company)
who earned $100,000 or more during the periods presented. Amounts shown for a
portion of 1997 represent compensation for employment by WE JAC Corporation, the
Company's predecessor. Options grants shown for 1997 and a portion of 1998
represent grants by WE JAC Corporation which were assumed by the Company in
connection with the IPO Combination.

<TABLE>
<CAPTION>
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION(1)
- --------------------------- ---- ------ ----- ------------ ------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles Dunlap 1999 $131,538(2) $118,750(3) 200,000 $1,615
President and
Chief Executive Officer
John F. Ripley 1999 $108,702(4) $80,000(5)
Former President and 1998 199,654 $100,000 87,762 279
Chief Executive Officer 1997 181,734 63,438 100,000
Jaime Valdes 1999 $120,000 25,000
Senior Vice President - 1998 21,250(6) 25,000
Latin America
James A. Hay 1999 $137,185(7) $13,526(8)
Former Executive Vice President 1998 117,692 $15,000(9) 35,000 323
North America
Arnold Janofsky 1999 $117,623(10) $11,643(11)
Former Senior Vice President and 1998 127,308 $9,646 3,500 600
General Counsel 1997 117,269 4,000
</TABLE>

(1) Amounts represent the Company's matching contributions to the 401(k) Savings
Plan and severance payments as indicated below.
(2) Mr. Dunlap's employment with the Company began October 1998.
(3) Mr. Dunlap was awarded a grant of 50,000 shares of restricted stock on March
31, 1999 valued at $2 3/8 per share price. As of June 30, 1999, this grant was
worth $153,150 based on a $3 1/16 per share price. No dividends will be paid on
this award.
(4) Mr. Ripley resigned from the Company on October 21, 1998.
(5) The amount shown includes severance payments of $80,000.
(6) Mr. Valdes' employment with the Company began April 1998.
(7) Mr. Hay's employment with the Company was terminated effective June 2,
1999.
(8) The amount shown includes severance payments of $12,470.
(9) Mr. Hay's employment with WE JAC Corporation, the Company's predecessor
commenced on July 1, 1997. The amount shown is for the reimbursement of
relocation expenses.
(10) Mr. Janofsky's employment with the Company was terminated effective June 2,
1999.
(11) The amount shown includes severance payments of $10,693.

17
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
NUMBER OF AT ASSUMED ANNUAL RATES
SECURITIES WEIGHTED OF STOCK PRICE APPRECI-
UNDERLYING % OF TOTAL OPTIONS AVERAGE ATION FOR OPTION TERM(4)
------------------------
OPTIONS GRANTED TO EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED(1) IN FISCAL YEAR PRICE(2) DATE(3) 5% 10%
- ---- ---------- -------------- -------- ------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles Dunlap 200,000 36.0% 3.475 03/31/09 $288,831 $834,692
John F. Ripley (5) - 0.0%
Jaime Valdes 25,000 4.55% 2.375 03/31/09 63,857 134,708
James A. Hay (6) - 0.0%
Arnold Janofsky (6) - 0.0%
</TABLE>

(1) Stock options exercisable into 549,375 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, 1999.

(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.

(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. Options granted in March 1999 also
include an acceleration of vesting provision whereby, to the extent not
previously vested, 25% of the options will vest when the Company's stock
price closes at $4.00 per share, 75% will vest when the stock price closes
at $6.00 per share, and 100% will vest when the stock price closes at $8.00
per share.

(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 dependent 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.

(6) Mr. Hay's and Mr. Janofsky's employment with the Company was terminated
effective June 2, 1999.

YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT JUNE 30, VALUE OF THE UNEXERCISED IN-THE-MONEY
1999 OPTIONS AT JUNE 30, 1999(1)
---- ---------------------------

NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charles Dunlap 25,000 175,000 $17,188 $51,563
John F. Ripley (2) 93,100 0
Jaime Valdes 14,583 35,417 4,297 12,891
James A. Hay (3) 14,999 0 0 0
Arnold Janofsky (3) 19,833 0 0 0
</TABLE>

(1) The closing price for the Company's Common Stock as reported by the
Nasdaq Stock Market on June 30, 1999 was $3.0625. Value is calculated on
the basis of the difference between the option exercise price and $3.0625,
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 vested options. The remainder of Mr. Ripley's
options have been terminated.
(3) Mr. Hay and Janofsky were terminated from the Company effective June 2,
1999. Unexercisable options held at the time they departed expired by their
terms.

18
<PAGE>

COMPENSATION OF DIRECTORS

Directors who are employees receive no additional compensation for
serving as directors. The Company's recent cash flow difficulties have had an
impact on the compensation of non-employee directors. The Company's policy had
been for non-employee directors to receive: (i) $1,000 for each Board of
Directors meeting attended in person; (ii) $500 for each Board of Directors
meeting attended via telephone; and (iii) for members of Board Committees, $200
for each Committee meeting attended. In October 1998, the Board decided to
suspend payment of such fees. In March 1999, the non-employee directors agreed
to forgo payment of all fees owed for the fiscal year ended June 30,1999.
However, in lieu of such cash fees, the Board granted restricted stock awards of
5,000 shares of the Company's Common Stock to each of the following non-employee
directors: Woodley A. Allen; George A. Bavelis; Lynn E. Caruthers; Bernard
Clineburg; Bassam N. Ibrahim; Richard O. Johnson; Arthur Kellar; Harry G.
Pappas, Jr.; and Gerald A. Zamensky. Under the terms of each grant, each outside
director's right, title and interest to the 5,000 shares will not vest until the
third anniversary of the grant (i.e., March 2002). No portion of the restricted
stock award will vest and no shares will be issued prior to the third
anniversary unless the following conditions are satisfied: (a) if the Company's
stock price closes at $4.00 per share, 25% of the shares will become vested; (b)
if the Company's stock price closes at $6.00 per share, 75% will become vested;
and (c) if the Company's stock price closes at $8.00 per share, 100% of the
shares will become vested.

Mr. Woodley Allen is due to be paid $10,000 per month for his services
as a special financial consultant to the Company from December 1998 through
January 1999. In addition, in December 1998, the Board of Directors awarded Mr.
Allen an option to purchase 10,000 restricted shares of the Company's Common
Stock with an exercise price of $3.625. The underlying shares are not registered
under the federal securities laws. The option expires December 31, 2008.

Employment Agreements

General. 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 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.

In June 1999, the Company entered into an agreement with Jerry L.
Little pursuant to which Mr. Little agreed to serve as Senior Vice President and
Chief Financial Officer. Mr. Little will receive a base salary of $20,000 per
month. In conjunction with Mr. Little's employment, Mr. Little was granted an
option to purchase 35,000 shares of the Company's Common Stock. These options
have an exercise price of $2.50 and vest as follows: 17,500 shares shall vest
upon the completion of the 1999 fiscal year end audit and filing of the SEC form
10K and the balance shall vest upon satisfactory completion of the installation
of the Company's financial software system unless the stock price achieves
certain price levels then a portion of the shares shall vest upon each
achievement. These options expire June 1, 2009. The agreement provides that
either Mr. Little or the Company may terminate the agreement by providing 90
days notice.

Severance Arrangements. In October 1998, the Company entered into an
agreement with John (Jay) F. Ripley in connection with his resignation as
President and Chief Executive Officer of Precision Auto Care, Inc. Pursuant to
the terms of this separation agreement, Mr. Ripley is entitled to receive
payments of $10,000 a month until October 1999 for serving as a special advisor
to the Company. The Board of Directors also extended to October 1999 the period
of time Mr. Ripley has to exercise 93,100 of his vested stock options.

In connection with reorganizing the Company in order to reduce costs and
provide for a more responsive management structure, the Company eliminated the
senior management positions occupied by Messrs. Hay and Janofsky and their
employment with the Company terminated effective June 2, 1999. Following the
elimination of these positions, Messrs. Hay and Janofsky 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 two executives concerning ways to
resolve the parties' differences.

Revised Employment Agreements. In March 1999, the Company granted
stock options and awards to certain executive officers. As a condition to the
grant of certain options, those executive officers that had entered into
employment agreements previously were asked to terminate these prior agreements
and enter into new employment agreements. In April 1999 and September 1999, the
Company entered into revised employment agreements with Jaime Valdes and William
R. Klumb respectively pursuant to which Mr. Valdes agreed to serve as Senior
Vice President - Latin American Division and Mr. Klumb as Vice President - Car
Wash Division for a period of three years beginning April 1, 1998 and August 26,
1997 respectively. Messrs. Valdes and Klumb will each receive a base salary of
$120,000 per annum. Under

19
<PAGE>

the terms of the employment agreements, Messrs. Valdes and Klumb are required to
maintain the confidentiality of proprietary business or technical information
they obtain in the course of their employment with the Company, and are
prohibited from competing with the Company in the United States during any time
they are performing duties for the Company and for a period of two years
thereafter except that if Mr. Klumb's employment is terminated by the Company
other than for cause, or is terminated by Mr. Klumb for good reason, then Mr.
Klumb's non-competition covenant shall last for a period of time equal to the
lessor of 12 months or the remainder of his initial term (if it has not yet
expired) or the number of months remaining in any additional one-year term
arising thereafter. In the event Messrs. Valdes' or Klumb's employment is
terminated by the Company other than for cause, or is terminated by either one
of them for good reason (e.g., following a change of control of the Company),
the terminated officer 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 lessor
of the 12 months or the remainder of his initial term (if it has not yet
expired) or the number of months remaining in any additional one-year term
arising thereafter, and will be entitled to receive any salary and benefits
accrued, vested or unpaid as of the date of termination.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the shares of Common Stock beneficially owned by
(i) person known by the Company to beneficially own greater than 5% of the
Company's outstanding stock, (ii) each director of the Company, (iii) each
executive officer named in the table below labeled Summary Compensation Table,
and (iv) all directors and executive officers of the Company as a group. 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>
Amount of Percentage of Outstanding
--------- -------------------------
Name of Beneficial Owner Beneficial Ownership Common Stock
- ------------------------ -------------------- ------------
<S> <C> <C>
Five-Percent Stockholders:
SAFECO Corporation/(1)/ 1,215,500 16.54%
Avenir Corporation/(2)/ 713,500 10.42%
Roberto Zambrano V., Mauricio Zambrano V. 7.82%
David Zambrano V. & Daniel Zambrano/(3)/ 520,421
William P. Stiritz/(4)/ 500,000 7.54%

Directors and Executive Officers:
Lynn E. Caruthers/(5)/ 140,581 2.29%
Charles Dunlap/(6)/ 108,333 1.75%
John F. Ripley/(7)/ 105,050 1.69%
Jaime Valdes/(8)/ 64,004 1.04%
William R. Klumb/(9)/ 61,429 *
John T. Wiegand/(10)/ 27,250 *
Peter Tahinos/(11)/ 23,584 *
James A. Hay/(12)/ 3,161 *
Arnold Janofsky/(13)/ 3,725 *
Woodley A. Allen/(14)/ 28,000 *
George A. Bavelis/(15)/ 93,317 1.52%
Bernard H. Clineburg/(16)/ 17,500 *
Effie L. Eliopulos/(17)/ 269,562 4.38%
Bassam N. Ibrahim/(18)/ 18,850 *
Richard O. Johnson 61,497 1.00%
Arthur Kellar/(19)/ 210,029 3.41%
Harry G. Pappas, Jr./(20)/ 31,000 *
Gerald A. Zamensky/(21)/ 104,641 1.71%
All directors and executive officers as a group 1,426,225 21.84%
(23 persons)/(22)/)
</TABLE>

* Represents less than 1%.

(1) As reported in Schedule 13G (Amendment No. 2) filed with the Commission on
February 12, 1999. Includes shares held by SAFECO Common Stock Trust, SAFECO
Resource Series Trust and SAFECO Asset Management Company. Safeco Corporation's
business address is SAFECO Plaza, Seattle, Washington 98185.

(2) As reported in Schedule 13G (Amendment No. 1) filed with the Commission on
February 11, 1999. Avenir Corporation's business address is 1725 K Street, NW,
Suite 410, Washington, DC 20006.

20
<PAGE>

(3) As listed in the Company's stock transfer records. The shares are held in
the names of the listed individuals as joint tenants. The business address for
each such reporting person is P.O. Box 1499, Olmito, Texas 78575.

(4) 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. Mr. Stiritz's business address is 10401 Clayton
Road, Suite 101, St. Louis, Missouri 63131.

(5) Includes a restricted stock award of 5,000 shares and 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.

(6) Includes a restricted stock award of 50,000 shares and includes 58,333
options to purchase shares that are exercisable within 60 days.

(7) Mr. Ripley resigned from the Company on October 21, 1998. Includes options
to purchase 93,000 shares that are exercisable within 60 days.

(8) Includes options to purchase 14,583 shares that are exercisable within 60
days.

(9) Includes a restricted stock award of 10,000 shares and includes 13,333
options to purchase shares that are exercisable within 60 days.

(10) Includes a restricted stock award of 15,000 shares and includes 11,000
options to purchase shares that are exercisable within 60 days.

(11) Includes a restricted stock award of 10,000 shares and includes 13,000
options to purchase shares that are exercisable within 60 days.

(12) Mr. Hay's employment with the Company was terminated effective June 2,
1999.

(13) Mr. Janofsky's employment with the Company was terminated effective June 2,
1999.

(14) Includes a restricted stock award of 5,000 shares and includes 20,000
options to purchase shares that are exercisable within 60 days.

(15) Includes a restricted stock award of 5,000 shares and includes 4,500
options to purchase shares that are exercisable within 60 days.

(16) Includes a restricted stock award of 5,000 shares and includes 10,000
options to purchase shares that are exercisable within 60 days.

(17) Includes 20,458 options to purchase shares that are exercisable within 60
days.

(18) Includes a restricted stock award of 5,000 shares and includes 10,000
options to purchase shares that are exercisable within 60 days.

(19) Includes a restricted stock award of 5,000 shares and includes 35,000
options to purchase shares that are exercisable within 60 days.

(20) Includes a restricted stock award of 5,000 shares and includes 12,500
options to purchase shares that are exercisable within 60 days.

(21) Includes a restricted stock award of 5,000 shares and includes 47,176
shares held by Mr. Zamensky's spouse.

(22) Includes restricted stock awards of 130,000 shares and includes 373,597
options to purchase shares that are exercisable within 60 days of executive
officers and directors.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In November 1997, certain directors either directly or through affiliated
entities, were granted options to purchase certain properties and lease them
back to the Company (the "Hellenic Options"). Hellenic, LLC, a limited liability
company partially owned by directors George A. Bavelis (15.12%) and Effie L.
Eliopulos (15.12%) held the Hellenic Options on the real estate relating to nine
car wash centers. In March 1999, in a non-related party transaction, the Company
entered into an agreement to sell the real estate related to the Hellenic
Options. As consideration for the waiver of the Hellenic Options the Company
agreed to grant Hellenic LLC the option to purchase 25,000 shares of the
Company's Common Stock at an exercise price of $2.00. The underlying shares have
not been registered under the federal securities laws. Subsequently, Hellenic
LLC assigned portions of this restricted stock option to its members, of which,
George A. Bavelis and Effie L. Eliopulos received options for 4,500 shares and
9,000 shares of the Company's Common Stock, respectively.

In October 1998, all of the Company's directors except Messrs. Clineburg and
Pappas participated in the creation of a limited liability company formed for
the purpose of loaning the Company $2 million in a subordinated debt financing.
The loan was initiated by these directors and subsequently incorporated as a
requirement of the Company's existing credit facility. The loan bears interest
at a rate of 14% per annum and its terms call for the rate of interest to be
increased in the event of a default by the Company on this loan or on any of the
Company's senior indebtedness. As of August 15, 1999, these directors agreed to
remove all defaults and defer current interest through December 31, 1999. The
loan due date has been amended to November 1, 2000, and the directors have
agreed to accept the Company's stock in lieu of the outstanding accrued interest
through August 15, 1999.

21
<PAGE>

In January 1999, the Company borrowed $5.0 million from Arthur Kellar, a
director of the Company, pursuant to the terms of a Subordinated Debenture (the
"Subordinated Debenture"). The Subordinated Debenture was initiated by the
directors of the Company and subsequently incorporated as a requirement of the
Company's existing credit facility. The Subordinated Debenture bears interest at
a rate of 15% per annum and its terms call for the rate of interest to be
increased in the event of a default by the Company. As an inducement for the
purchase of the Subordinated Debenture, the Company agreed to issue Mr. Kellar
options to purchase 25,000 shares of the Company's Common Stock at an exercise
price equal to $2.00. The Company also agreed to pay Mr. Kellar a financing fee
at the maturity of the Subordinated Debenture in the amount of $50,000. In May
1999, the Shareholders approved the issuance of shares of the Company's Common
Stock in order to pay the interest and fees on the Subordinated Debenture. These
shares were not registered under the federal securities laws. This loan is
currently in default. The Company is presently negotiating terms under which the
loan will be restructured. It is the Company's intention to further request the
approval of an issuance of the Company's Common Stock to Mr. Kellar based on
past accrued interest.

In June 1998, the Company entered into a contract to sell a parcel of
real-estate located in Greenwood, Indiana to Precision Ventures, LLC.
("Precision Ventures") for $260,000. Precision Ventures also purchased two
franchises from the Company to operate at that location for $26,000. Precision
Ventures is partially owned by Andrew Zamensky (25%) who is the son of Gerald
Zamensky, a director of the Company. The Company acquired the property in
December 1997 for $220,000. The fairness of the negotiated sales price was
approved at the time of the transaction by John F. Ripley, the former Chief
Executive Officer of the Company. In June, 1998, the Company received $26,000 of
the sales price for the real estate. The balance was due on or before November
30, 1998 under a promissory note. No interest was being charged on the note due
to the fact that the land is not yet zoned for the operation of a car wash and
quick oil change and lube business. Due to the fact that zoning was delayed, the
promissory note was not paid until July 1999 for a reduced amount of $223,000.
The reduction in purchase price was approved by Charles Dunlap, the Company's
current Chief Executive Officer.

In June 1998, the Company sold a Company-owned auto care center located in
Denver Colorado to Inter-Ventures, LLC ("Inter-Ventures") for $220,000.
Inter-Ventures is partially owned by William B. Klumb (25%) and Effie L.
Eliopulos (16.67%). Mr. Klumb is an officer and director, and Ms. Eliopulos is a
director of the Company. The Company acquired the center which it had been
operating under a management agreement since February 1997 in June 1998 for
$106,200. The fairness of the negotiated sales price was approved at the time of
the transaction by James A. Hay, a former executive officer of the Company. The
Company has been paid the purchase price in full. In relation to this
transaction and due to the fact that the Company was not able to assign the then
current lease to Inter-Ventures, the Company agreed to pay Inter-Ventures the
sum of $19,150 which represents the value of the higher monthly rental over the
old lease or a credit of $25,000 to be used against franchise operating fees
and/or purchase of supplies and equipment from the Company's subsidiary and that
the Company would offer its guaranty in lieu of the individual principals. In
addition, the Company agreed to pay the attorneys' fees of Inter-Ventures
related to the negotiation of a new lease, which amounted to $4,387.13. The
Finance and Audit Committee approved and the Company's Board of Directors
(without the participation of Mr. Klumb and Ms. Eliopulos), ratified the offset
/ credit and payment of attorneys' fees. William B. Klumb (25%) and Effie L.
Eliopulos (16.67%) are partial owners of Inter-Ventures, LLC ("Inter-Ventures").
In conjunction with this center, Inter-Ventures pays the Company approximately
$4,000 per month for franchise royalties, inventory and supplies associated with
these operations.

Bassam N. Ibrahim, a director of the Company, is a partner in Burns, Doane,
Swecker & Mathis, LLP, an Alexandria, Virginia law firm that performs legal
services for the Company related to intellectual property protection. Fees paid
to the firm by the Company in the fiscal year ended June 30, 1999 did not exceed
five percent of the firm's gross revenues.

22
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements

Information responsive to this Item cannot be obtained on a timely
basis by the Company without unreasonable effort or expense and is the subject
of a Form 12b-25 filing made by the Company. The Company intends to supply this
information under cover of a Form 10-K/A amendment to this Form 10-K within
15 calendar days.

2. Financial Statement Schedules

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the three-month
period ended June 30, 1999.

3.1 Articles of Incorporation of the Company included as an exhibit to the
Company's Registration Statement on Form S-1 (No. 333-34439) filed August 27,
1997, are incorporated herein by reference.

3.2 By-laws of the Company included as an exhibit to the Company's Registration
Statement on Form S-1 (No. 333-34439) filed August 27, 1997 are incorporated
herein by reference.

4.1 Subordinated Debenture dated January 25, 1999, in the principal amount of
$5,000,000, included as an exhibit to the Company's Current Report on Form 8-K,
filed February 1, 1999, is incorporated herein by reference.

4.2 Amended and Restated Loan Agreement between the Company and certain of its
subsidiaries wholly-owned or controlled by it and First Union National Bank,
included as an exhibit to the Company's Current Report on Form 8-K filed March
31, 1999, is incorporated herein by reference.

10.1 Plan of Reorganization and Agreement for Combination of Business dated as
of August 27, 1997, by and among the Company, WE JAC Corporation, Miracle
Industries, Inc., Lube Ventures, Inc., Rocky Mountain Ventures, Inc., Rocky
Mountain Ventures II, Inc., Miracle Partners, Inc., Prema Properties, LLC,
Ralston Car Wash, LLC and KBG LLC, included as an Exhibit to the Company's
Registration Statement on Form S-1 (No. 333-34439) filed August 27, 1997, is
incorporated herein by reference.

10.2 Loan and Security Agreement between the Company and its designated
subsidiaries and Signet Bank, now known as First Union National Bank, dated as
of November 12, 1997, but incorporating on a composite basis the terms of
Amendment No. 2 dated as of May 12, 1998, included as an exhibit to the
Company's Amended Annual Report on Form 10-K/A filed September 28, 1998, is
incorporated herein by reference.

10.3 Amendment No. 3 to Loan and Security Agreement between the Company and its
designated subsidiaries and First Union National Bank dated October 1, 1998,
included as an exhibit to the Company's Amended Annual Report on Form 10-K/A
filed September 28, 1998, is incorporated herein by reference.

10.4 Second Consolidated, Amended and Restated Revolving and Acquisition Line of
Credit Promissory Note by the Company and its designated Subsidiaries in favor
of First Union National Bank dated October 1, 1998, included as an exhibit to
the Company's Amended Annual Report on Form 10-K/A filed September 28, 1998, is
incorporated herein by reference.

<PAGE>

10.5 Employee Stock Purchase Plan, included as an exhibit to the Company's
Registration Statement on Form S-8 (No. 333-49097), filed April 1, 1998, is
incorporated herein by reference.

10.6 Employee Stock Option Plan, included as an exhibit to the Company's
Registration Statement on Form S-8 (No. 333-47169), filed March 2, 1998, is
incorporated herein by reference.

10.7 Employment Agreement between the Company and John F. Ripley, dated June
17, 1998, included as an exhibit to the Company's Amended Annual Report on Form
10-K/A filed September 28, 1998, is incorporated herein by reference.

10.8 Employment Agreement between the Company and James A. Hay, dated August
27, 1997, included as an exhibit to the Company's Registration Statement on Form
S-1 (No. 333-34439) filed August 27, 1997 is incorporated herein by reference.

10.9 Employment Agreement between the Company and Arnold Janofsky, dated
August 27, 1997, included as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-34439) filed August 27, 1997, is incorporated herein by
reference.

10.10 Employment Agreement between the Company and Grant G. Nicolai, dated
August 27, 1997, included as an exhibit to the Company's Registration Statement
on Form S-1 (No. 333-34439) filed August 27, 1997, is incorporated herein by
reference.

10.11 Employment Agreement between the Company and John F. Moynahan, dated June
8, 1998, included as an exhibit to the Company's Amended Annual Report on Form
10-K/A filed September 28, 1998, is incorporated herein by reference.

10.12 Employment Agreement between the Company and Peter Kendrick, dated August
27, 1997, included as an exhibit to the Company's Registration Statement on Form
S-1 (No. 333-34439) filed August 27, 1997, is incorporated herein by reference.

10.13 Employment Agreement between the Company and Jaime J. Valdes dated March
31, 1998, included as an exhibit to the Company's Amended Annual Report on Form
10-K/A filed September 28, 1998, is incorporated herein by reference.

10.14 Independent Contractor Agreement between the Company and Ernest S. Malas
dated November 12, 1997, included as an exhibit to the Company's Amended Annual
Report on Form 10-K/A filed September 28, 1998, is incorporated herein by
reference.

10.15 Subscription and Stock Purchase Agreement dated as of March 31, 1998, by
and among the Company, Precision Auto Care Mexico I, S. de R.L. de C.V., and
Promotora de Franquicias Praxis, S.A. de C.V., included as an exhibit to the
Company's Current Report on Form 8-K, filed April 15, 1998, is incorporated
herein by reference.

10.16 Agreement with John F. Ripley, dated October 21, 1998, included as an
exhibit to the Company's Amended Quarterly Report on Form 10-Q/A, filed November
20, 1998, is incorporated herein by reference.

10.17 Employment Agreement with Charles L. Dunlap, dated October 21, 1998,
included as an exhibit to the Company's Amended Quarterly Report on Form 10-Q/A,
filed November 20, 1998, is incorporated herein by reference.

10.18 Subordinated Debenture Agreement with Board LLC, dated October 15, 1998,
included as an exhibit to the Company's Amended Quarterly Report on Form 10-Q/A,
filed November 20, 1998, is incorporated herein by reference.

10.19 1998 Employee Stock Purchase Plan included as an exhibit to the Company's
Quarterly Report on Form 10-Q, filed February 16, 1999, is incorporated herein
by reference.

10.20 1998 Outside Directors' Stock Option Plan included as an exhibit to the
Company's Quarterly Report on Form 10-Q, filed February 16, 1999, is
incorporated herein by reference.

10.21 Mortgage Finance Documents (Heartland Bank), dated March 8, 1999,
included as an exhibit to the Company's Quarterly Report on Form 10-Q, filed May
17, 1999, is incorporated herein by reference.

10.22 1999 Employee Stock Option and Restricted Stock Plan, included as Exhibit
A to the Company's definitive Proxy Statement for the Special Meeting of
Shareholders held on May 25, 1999, is incorporated herein by reference.

*10.23 Revised Employment Agreement dated April 20, 1999, between the Company
and Jaime Valdes.

*10.24 Revised Employment Agreement dated September 27, 1999, between the
Company and William R. Klumb.

*10.25 Amended and Restated Loan and Security Agreement dated as of February 1,
1999, between the Company and its designated subsidiaries and First Union
National Bank.

24
<PAGE>

* 10.26 Third Consolidated, Amended and Restated Revolving and Acquisition Line
of Credit Promissory Note by the Company and its designated subsidiaries in
favor of First Union National Bank dated February 1, 1999.

* 10.27 Loan Agreement dated as of May 17, 1999, by and between FFCA Acquisition
Corporation and the Company.

* 10.28 First Amendment dated May 13, 1999, to Amended and Restated Loan and
Security Agreement between the Company and its designated subsidiaries and
First Union National Bank.

* 10.29 Employment Agreement dated June 1, 1999, between the Company and Jerry
Little.

* 21. Significant Subsidiaries of the Company.

* 24. Powers of Attorney.

_____________________

* Filed herewith

25
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

26
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on September 28, 1999.

PRECISION AUTO CARE, INC.

By: /s/ CHARLES L. DUNLAP
-------------------------------------
Charles L. Dunlap
President and Chief Executive Officer
(Duly Authorized Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ * Chairperson of the Board September 28, 1999
---------------------
LYNN E. CARUTHERS

/s/ CHARLES L. DUNLAP President, Chief Executive Officer and September 28, 1999
---------------------
Director (Principal Executive Officer)
CHARLES L. DUNLAP

/s/ JERRY L. LITTLE Senior Vice President and Chief Financial September 28, 1999
---------------------
Officer (Principal Financial Accounting
JERRY L. LITTLE Officer)

Director September 28, 1999
*
---------------------
WOODLEY A. ALLEN

Director September 28, 1999
*
---------------------
GEORGE A. BAVELIS

Director September 28, 1999
*
---------------------
BERNARD H. CLINEBURG

Director September 28, 1999
*
---------------------
EFFIE L. ELIOPULOS

Director September 28, 1999
*
---------------------
BASSAM N. IBRAHIM

Director September 28, 1999
*
---------------------
RICHARD O. JOHNSON
</TABLE>

27
<PAGE>

SIGNATURE TITLE DATE
--------- ----- ----
Director September 28, 1999
*
-----------------------
ARTHUR KELLAR

Director September 28, 1999
*
-----------------------
HARRY G. PAPPAS, JR.

Director September 28, 1999
*
-----------------------
WILLIAM R. KLUMB

Director September 28, 1999
*
-----------------------
GERALD A. ZAMENSKY

*By: /s/ ELIOT G. BOWYTZ
-----------------------
Eliot G. Bowytz
Attorney-in-Fact
(Upon the Authority of a Power-of-Attorney filed as Exhibit 24 to this
Annual Report.)

<PAGE>

Exhibit 10.23

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made as of this 20th day of April, 1999, by and between
Jaime Valdes, a resident of Monterrey, Mexico (the "Executive"), and Precision
Auto Care, Inc., a Virginia corporation (the "Company").

WITNESSETH:

WHEREAS, on March 31, 1999 the Company granted to the Executive options to
purchase 25,000 shares of the Company's common stock pursuant to the terms of
the Company's 1999 Employee Stock Option Restricted Stock Plan (the "Stock
Option Plan").

WHEREAS, it was a condition to the grant of the options and the award of
restricted shares to the Executive that the Stock Option Plan be approved by the
Company's shareholders and that the Executive agree to terminate the terms of
all employment agreements between the Executive and the Company, including,
without limitation, the Employment Agreement between the Executive and the
Company dated March 31, 1998, and to replace the terms of such employment
agreements with the terms of this employment agreement.

WHEREAS, the Executive desires to continue to provide his services to the
Company and the Company desires to continue to employ the Executive upon the
terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements contained herein, and intending to be legally bound,
the parties hereby agree as follows:

1. Employment and Term.
-------------------

The Company will employ the Executive, and the Executive hereby accepts
employment with the Company, for an initial term that shall be deemed to have
commenced on April 1, 1998, and shall continue for a period of three (3) years
thereafter until and including April 1, 2001, (the "Initial Term"), unless such
employment is earlier terminated as provided herein. After expiration of the
Initial Term, the Executive's employment under this Agreement shall continue for
consecutive one-year terms unless either party notifies the other that it is
terminating the agreement by giving the other party written notice at least 45
days prior to the termination of the Initial Term or applicable additional one-
year term. In the event that a party notifies the other that it is terminating
this Agreement in accordance with the preceding sentence, the Company shall not
have any obligation to pay any severance benefit or other compensation to the
Executive pursuant to Section 7 of this Agreement or otherwise.
<PAGE>

2. Duties.
------

The Executive shall serve in the capacity of Senior Vice President and
President - Latin American Division. During the term of his employment
hereunder, the Executive shall devote his full business time and attention to
the performance of his duties for the Company.

3. Compensation.
------------

(a) Base Salary. The Company shall pay the Executive, and the
-----------
Executive shall accept, as full compensation for all services rendered
hereunder, a basic salary (the "Base Salary") and the other compensation
and benefits provided hereunder. The Executive's Base Salary shall be at
an annual rate of One Hundred Twenty Thousand Dollars (US $120,000),
payable in approximately equal installments at such intervals as are
consistent with the Company's pay periods for salaried executive employees.
The Executive acknowledges that the Company is current in the payment of
the Base Salary for all periods through and including the date of this
Agreement.

(b) Performance Bonus. The Executive shall participate in bonus plans
-----------------
and shall be entitled to receive bonuses thereunder, as may be approved by
the Board of Directors in its discretion.

(i) The Executive shall be eligible to participate in retirement,
group insurance, medical, dental, vacation and any other plans or programs of
substantially similar character as are made generally available to executive
employees of the Company which do not duplicate the benefits otherwise
specifically provided in this Agreement. All such benefits are to be provided by
the Company, subject to the terms of any welfare or pension plan sponsored by
the Company.

(ii) The Company shall reimburse the Executive for all expenses
incurred by him in the performance of his duties pursuant to this Agreement in
accordance with the Company's policies concerning the reimbursement of expenses.

(iii) Executive shall receive such other benefits and/or
allowances as are permitted to him from time to time by the Board of Directors.

(d) Restructuring of Payments. Notwithstanding anything in this
Agreement to the contrary, in the event that, in the opinion of the Company's
auditors, any payments of compensation to be made hereunder would be treated as
"excess parachute payments" within the meaning of section 280G of the Internal
Revenue Code as amended, the Company and the Executive shall use their best
efforts to restructure any of the payments so as to avoid the imposition of
excise tax upon the Executive and the loss of deduction for such payments by the
Company.
<PAGE>

4. Confidentiality.
---------------

While employed by the Company under this Agreement and at all times
thereafter, the Executive shall not, without the prior written consent of the
Company, divulge to any third party or use for his own benefit or the benefit of
any third party, or for any purpose other than the exclusive benefit of the
Company, any confidential or proprietary business or technical information
revealed, obtained or developed in the course of his employment with the Company
or his duties performed for the Company or which is otherwise the property of
the Company or any of its subsidiaries or affiliated companies; provided that,
nothing contained herein shall restrict the Executive's use or disclosure of
such information (i) in the proper course of conduct of the Company's business,
(ii) known generally to the public (other than that which he may have disclosed
in breach of this Agreement) or (iii) as required by law so long as the
Executive gives the Company prior notice of such required disclosure and
cooperates with the Company in keeping the information confidential unless
precluded from doing so by legal authority.

5. Covenant Not to Compete.
-----------------------

(a) The Executive shall not, within any geographical area while
employed by the Company or while performing duties for the Company hereunder,
and within the United States of America for two (2) years thereafter, directly
or indirectly engage or become interested in (as owner, stockholder, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) any
business that engages in an auto care or manufacturing business of a type
conducted by the Company or any of its subsidiaries during the term of this
Agreement. Notwithstanding the foregoing, the Executive may hold as a passive
investment up to five percent (5%) of the outstanding securities of any class of
any publicly-held entity that engages in the auto care industry.

(b) It is the desire and the intent of the parties that the provisions
of this Section 5 shall be enforceable to the fullest extent permissible under
applicable law and public policy. Accordingly, if this Section 5 or any portion
thereof shall be adjudicated to be invalid or unenforceable, the length and
scope of this Section 5 shall be reduced to the extent necessary so that this
covenant may be enforced to the fullest extent possible under applicable law.
The parties hereto do expressly authorize any court of competent jurisdiction or
any arbitrator or panel of arbitrators convened in accordance with Section 6(b)
of this Agreement to enforce any provision of this Section 5 or portion thereof
or to modify any such provision or portion thereof in order that any such
provision or portion thereof shall be enforced to the fullest extent permitted
by applicable law.

6. Enforcement.
-----------

(a) Injunctive Relief. The parties recognize that, in the event of any
breach by the Executive of any of the provisions of Section 4 or 5 hereof, the
Company will suffer continuing and irreparable harm for which the Company will
not have an adequate remedy at law. The Executive hereby waives any and all
right to assert any claim or defense that the Company has an adequate remedy at
law for any such breach. In recognition thereof, the Company and the Executive
hereby agree that, in the event of any such breach, the Company
<PAGE>

will be entitled to seek injunctive relief or any other appropriate remedy to
enforce such provisions. The parties further agree that this Section 6 shall not
in any way limit remedies at law or in equity otherwise available to the
Company. In the event the Company seeks injunctive relief and is unsuccessful on
the merits, or terminates such action prior to entry of a judgment or other
ruling on the merits, other than a termination of such action due to a
settlement agreement between the Company and the Executive, the Company shall
reimburse the Executive for his reasonable attorneys' fees.

(b) Arbitration. In the event of any dispute between the parties under
-----------
or relating to this Agreement or relating to the Executive's employment by the
Company, such dispute shall be submitted to and settled by arbitration in the
Commonwealth of Virginia in accordance with the Employment Dispute Resolution
Rules of the American Arbitration Association then in effect, by an arbitrator
or arbitrators selected in accordance with said rules. The arbitrator(s) shall
have the right and authority to determine how their award or decision as to each
issue and matter in dispute may be implemented or enforced. Any decision or
award shall be final and conclusive on the parties; there shall be no appeal
therefrom other than for claimed bias, fraud or misconduct by the arbitrator(s);
judgment upon any award or decision may be entered in any court of competent
jurisdiction in the Commonwealth of Virginia or elsewhere; and the parties
hereto consent to the application by any party in interest to any court of
competent jurisdiction for confirmation or enforcement of such award. The party
against whom a decision or award is made shall pay the fees of the American
Arbitration Association. Notwithstanding the foregoing, the Company, at its
sole option, shall be entitled to elect to enforce its rights contemplated by
Section 6(a) hereof relating to breaches of Section 4 or 5 hereof by arbitration
pursuant to a proceeding commenced by the Company in a court of competent
jurisdiction in lieu of an arbitration proceeding.

7. Termination of Employment.
-------------------------

(a) Death. The Executive's employment hereunder shall terminate in the
-----
event of Executive's death. Except for any salary and benefits accrued, vested
and unpaid as of the date of any such termination and except for any benefits to
which the Executive or his heirs or personal representatives may be entitled
under and in accordance with the terms of any employee benefit plan, policy or
program maintained by the Company, the Company shall be under no further
obligation hereunder to the Executive or his heirs or personal representatives,
and the Executive or his heirs and personal representatives no longer shall be
entitled to receive any payments or any other rights or benefits under this
Agreement.

and unpaid as of the date of any such termination and any benefits to which the
Executive may be entitled under and in accordance with the terms of any employee
benefit plan, policy or program maintained by the Company. The Company shall be
under no further obligation hereunder to the Executive, and the Executive no
longer shall be entitled to receive any other payments, rights or benefits under
this Agreement.

(c) Termination by the Company for Cause. The Company may terminate
------------------------------------
the Executive's employment hereunder for "Cause." For purposes of this
Agreement, "Cause" shall mean any of the following:

(i) The Executive's willful misconduct or gross negligence;

(ii) The Executive's conscious disregard of his obligations
hereunder;

(iii) The Executive's conscious violation of any material
provision of the Company's by-laws or of its other stated policies, standards or
regulations; or

(iv) A determination that the Executive has demonstrated a
dependence upon any addictive substance, including alcohol, controlled
substances, narcotics or barbiturates.

The Executive shall not be entitled to receive any payments or any other rights
or benefits under this Agreement (except for any salary and benefits accrued,
vested and unpaid as of the date of any such termination) or otherwise and the
Company shall be under no further obligation hereunder to the Executive.
Following any termination for Cause, the Company shall have such rights and
remedies as may be available to it for any breach of this Agreement or
otherwise.

(d) Termination by the Company other than for Cause. The Company may
-----------------------------------------------
terminate the Executive's employment hereunder at any time for any other reason,
such termination being effective upon receipt of written notice. In the event
of such termination, the Executive shall be entitled to receive a severance
benefit equal to Base Salary at the rate in effect at the time of termination
for the lesser of (x) twelve (12) months and (y) the number of months remaining
in the Initial Term (if it has not yet expired) or the number of months
remaining in any additional one-year term arising thereafter, and shall also be
entitled to receive any salary and benefits accrued, vested and unpaid as of the
date of any such termination and any benefits to which the Executive may be
entitled under and in accordance with the terms of any employee benefit plan,
policy or program maintained by the Company. This severance benefit shall not
be paid in the form of a lump sum and shall be paid over and during the
applicable period of months in accordance with the Company's standard payroll
practices. The Company shall be under no further obligation hereunder to the
Executive and the Executive shall not be entitled to receive any payments or any
other rights or benefits under this Agreement or otherwise.

(e) Termination by the Executive for Good Reason. Notwithstanding anything
--------------------------------------------
herein to the contrary, the Executive shall be entitled to terminate his
employment
<PAGE>

hereunder for "Good Reason" without breach of this Agreement. For purposes of
this Agreement, "Good Reason" shall exist in the event of any of the following:

(i) A change in the Executive's place of employment outside of a
100-mile radius of Loudoun County, Virginia;

(ii) A material diminution in title or a substantial elimination
of the duties and responsibilities of the Executive; or

(iii) A material breach by the Company of its obligations
hereunder; or

(iv) The Executive shall cease to be the Senior Vice President of
the Company following a "change in control" of the Company. For purposes of this
Section 7(e)(iv), a "change in control of the Company" shall mean (A) the
acquisition, directly or indirectly, by any "person" (as such term is defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as in effect on
the date hereof), of voting power over voting shares of the Company that would
entitle holders thereof to cast at least fifty percent (50%) of the votes that
all shareholders would be entitled to cast in the election of directors of the
Company; or (B) during any period of two consecutive years during the Initial
Term of this Agreement, individuals who at the beginning of such period
constitute the Company Board of Directors cease for any reason to constitute at
least a majority thereof, unless the election of each director who is not a
director at the beginning of such period shall have been approved in advance by
directors representing at least a majority of the directors then in office who
are directors at the beginning of such period.

In the event of such termination by the Executive, the Executive shall
nonetheless be entitled to receive a severance benefit equal to Base Salary at
the rate stated in, and payable in the manner contemplated by, Section 7(d) of
this Agreement. Except for such severance benefit and except for any salary and
benefits accrued, vested and unpaid as of the date of such termination, the
Executive no longer shall be entitled to receive any payments or any other
rights or benefits under this Agreement, and the Company shall have no further
obligation hereunder or otherwise to the Executive following any such
termination.

(f) Termination by the Executive for other than Good Reason. The Executive
-------------------------------------------------------
may terminate his employment hereunder at any time for any other reason,
provided the Executive has given the Company ninety (90) days' written notice of
termination, termination being effective upon expiration of the notice period.
In the event of such termination, the Executive shall be entitled to receive any
salary and benefits accrued, vested and unpaid as of the date of any such
termination and any benefits to which the Executive may be entitled under and in
accordance with the terms of any employee benefit plan, policy or program
maintained by the Company. The Company shall be under no further obligation
hereunder to the Executive and the Executive no longer shall be entitled to
receive any other payments, rights or benefits under this Agreement or
otherwise.

(g) Pro-Rata Bonus. Whenever, pursuant to this Section 7, the Executive is
--------------
entitled, upon the termination of his employment, to receive "salary...accrued,
vested and unpaid
<PAGE>

as of the date of any such termination", the amount due him may include a pro-
rata performance bonus, if it would be appropriate to calculate a pro-rata
portion of a performance bonus in accordance with the provisions of any bonus
plan which may have been implemented in accordance with Section 3(b) hereof.

8. Place of Employment. The Company agrees that the principal location at
-------------------
which the Executive is to render his services hereunder will be Monterrey,
Mexico unless a modification is understood and agreed to in writing by Executive
and Company.

9. Withholding. Notwithstanding anything herein to the contrary, all
-----------
payments required to be made hereunder by the Company to the Executive, or his
estate or beneficiaries, shall be subject to the withholding of such amounts as
the Company may reasonably determine it should withhold pursuant to any
applicable law or regulation.

10. Survival. This Agreement shall survive any termination of the
--------
Executive's employment hereunder unless otherwise provided herein.

11. Miscellaneous.
-------------

(a) Successors and Assigns. The Company may assign this Agreement to,
----------------------
and only to, an entity which is owned more than fifty percent (50%), directly or
indirectly, by the Company, and any person or entity which acquires all or
substantially all of the Company's business, and, subject to the foregoing, upon
such assignment this Agreement shall inure to the benefit of and be binding upon
such entity. This Agreement shall not be assignable by the Executive and shall
inure to the benefit of and be binding upon him and his personal representative
and other legal representatives. It is understood that this Section 11(a) shall
not affect the right of the Executive to terminate his employment for "Good
Reason" pursuant to Section 7(e) hereof.

(b) Notice. Any notice or communication required or permitted under
------
this Agreement shall be made in writing or sent by certified or registered mail,
return receipt requested and postage prepaid, addressed as follows:

If to the Executive:

(insert Jaime's home address)

__________________________________

__________________________________
<PAGE>

If to the Company:

Precision Auto Care, Inc.
748 Miller Drive, S.E.
P.O. Box 5000
Leesburg, Virginia 20175
Attention: President

or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above. Notice shall be
deemed given when received by the other party, including by his or its agent.

(c) Entire Agreement; Amendments. This Agreement contains the entire
----------------------------
agreement and understanding of the parties relating to the subject matter hereof
and supersedes all prior discussions, agreements and understandings relating
thereto between them. This Agreement may not be changed or modified, except by
an agreement in writing executed by the Company, with the approval of its Board
of Directors or its designee, and by the Executive.

(d) Waiver. The waiver of a breach of any term or provision of this
------
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.

(e) Governing Law. All questions concerning the construction, validity,
-------------
enforcement and interpretation of this Agreement, and the performance of the
obligations imposed by this Agreement, shall be governed by the laws of the
Commonwealth of Virginia applicable to contracts made and wholly to be performed
in such state, without regard to choice of law principles.

(f) Severability. In the event that any one or more of the provisions
------------
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable, in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the Agreement. Such
invalid, illegal or unenforceable provision(s) shall be deemed modified to the
extent necessary to make it (them) valid, legal and enforceable.

(g) Indemnification. The Executive shall be entitled to the benefit of the
---------------
indemnification provided by the Charter and the Bylaws of the Company; provided
that the Company shall be permitted to amend such provisions from time to time
so long as the Executive, to the extent permitted by applicable law, is afforded
indemnification at least as favorable as that provided by the Charter and Bylaws
as in effect on the date hereof.

(h) Captions. All captions and section headings used herein are for
--------
convenient reference only and do not form a part of this Agreement.

(i) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall constitute one and the same Agreement.
<PAGE>

(j) Computation of Time. In computing any period of time pursuant to this
-------------------
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday. Likewise, if the period of
time concludes on a Saturday, Sunday or a legal holiday, the period shall run
until the end of the next day thereafter which is not a Saturday, Sunday, or
legal holiday.

(k) Pronouns and Plurals. All pronouns and any variations thereof shall be
--------------------
deemed to refer to the masculine, feminine, neuter, singular, or plural as the
identity of the person or persons may require.

(l) Prior Agreements. The Executive and the Company confirm that the terms
----------------
of this Employment Agreement shall supersede and replace in all respects all of
the terms and conditions set forth in any previous employment agreement between
the Executive and the Company, including, without limitation, the Employment
Agreement dated July 1, 1998.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.

PRECISION AUTO CARE, INC.

_______________________________
Charles L. Dunlap
President and CEO

EXECUTIVE

_______________________________
Jaime Valdes

<PAGE>

Exhibit 10.24

EMPLOYMENT AGREEMENT

THIS AGREEMENT, made as of this 27th day of September, 1999 by and between
William R. Klumb, a resident of Englewood, Colorado (the "Executive"), and
Precision Auto Care, Inc., a Virginia corporation (the "Company").

WITNESSETH:

WHEREAS, on March 31, 1999 the Company granted to the Executive options to
purchase 20,000 shares of the Company's common stock and awarded the Executive
10,000 shares of restricted stock pursuant to the terms of the Company's 1999
Employee Stock Option Restricted Stock Plan (the "Stock Option Plan").

WHEREAS, it was a condition to the grant of the options and the award of
restricted shares to the Executive that the Stock Option Plan be approved by the
Company's shareholders and that the Executive agree to terminate the terms of
all employment agreements between the Executive and the Company, including,
without limitation, the Employment Agreement between the Executive and the
Company dated August 26, 1997, and to replace the terms of such employment
agreements with the terms of this employment agreement.

WHEREAS, the Executive desires to continue to provide his services to the
Company and the Company desires to continue to employ the Executive upon the
terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements contained herein, and intending to be legally bound,
the parties hereby agree as follows:

1. Employment and Term.
-------------------

The Company will employ the Executive, and the Executive hereby accepts
employment with the Company, for an initial term that shall be deemed to have
commenced on November 12, 1997, and shall continue for a period of three (3)
years thereafter until and including November 12, 2000, (the "Initial Term"),
unless such employment is earlier terminated as provided herein. After
expiration of the Initial Term, the Executive's employment under this Agreement
shall continue for consecutive one-year terms unless either party notifies the
other that it is terminating the agreement by giving the other party written
notice at least 45 days prior to the termination of the Initial Term or
applicable additional one-year term. In the event that a party notifies the
other that it is terminating this Agreement in accordance with the preceding
sentence, the Company shall not have any obligation to pay any severance benefit
or other compensation to the Executive pursuant to Section 7 of this Agreement
or otherwise.
<PAGE>

2. Duties.
------

The Executive shall serve in the capacity of Vice President, Car Wash
Division. During the term of his employment hereunder, the Executive shall
devote his full business time and attention to the performance of his duties for
the Company.

3. Compensation.
------------

(a) Base Salary. The Company shall pay the Executive, and the
-----------
Executive shall accept, as full compensation for all services rendered
hereunder, a basic salary (the "Base Salary") and the other compensation and
benefits provided hereunder. The Executive's Base Salary shall be at an annual
rate of One Hundred Twenty Thousand Dollars ($120,000), payable in approximately
equal installments at such intervals as are consistent with the Company's pay
periods for salaried executive employees. The Executive acknowledges that the
Company is current in the payment of the Base Salary for all periods through and
including the date of this Agreement.

(iii) Executive shall receive such other benefits and/or
allowances as are permitted to him from time to time by the Board of Directors.

(d) Restructuring of Payments. Notwithstanding anything in this
-------------------------
Agreement to the contrary, in the event that, in the opinion of the Company's
auditors, any payments of compensation to be made hereunder would be treated as
"excess parachute payments" within the meaning of section 280G of the Internal
Revenue Code as amended, the Company and the Executive shall use their best
efforts to restructure any of the payments so as to avoid the imposition of
excise tax upon the Executive and the loss of deduction for such payments by the
Company.

4. Confidentiality.
---------------

2
<PAGE>

5. Covenant Not to Compete.
-----------------------

(a) The Executive shall not, within any geographical area while
employed by the Company or while performing duties for the Company hereunder,
and within the United States of America for two (2) years thereafter, except
that if the Executive is terminated by the Company other than for cause under
Section 7(d), or is terminated by the Executive for good reason as set forth
under Section 7(e), than for a period of time equal to the lessor of 12 months
or the remainder of the Initial Term (if it has not yet expired) or the number
of months remaining in any additional one-year term arising thereafter, directly
or indirectly engage or become interested in (as owner, stockholder, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) any
business that engages in an auto care or manufacturing business of a type
conducted by the Company or any of its subsidiaries during the term of this
Agreement. Notwithstanding the foregoing, the Executive may hold as a passive
investment up to five percent (5%) of the outstanding securities of any class of
any publicly-held entity that engages in the auto care industry.

3
<PAGE>

6. Enforcement.
-----------

(a) Injunctive Relief. The parties recognize that, in the event of any
-----------------
breach by the Executive of any of the provisions of Section 4 or 5 hereof, the
Company will suffer continuing and irreparable harm for which the Company will
not have an adequate remedy at law. The Executive hereby waives any and all
right to assert any claim or defense that the Company has an adequate remedy at
law for any such breach. In recognition thereof, the Company and the Executive
hereby agree that, in the event of any such breach, the Company will be entitled
to seek injunctive relief or any other appropriate remedy to enforce such
provisions. The parties further agree that this Section 6 shall not in any way
limit remedies at law or in equity otherwise available to the Company. In the
event the Company seeks injunctive relief and is unsuccessful on the merits, or
terminates such action prior to entry of a judgment or other ruling on the
merits, other than a termination of such action due to a settlement agreement
between the Company and the Executive, the Company shall reimburse the Executive
for his reasonable attorneys' fees.

(b) Arbitration. In the event of any dispute between the parties
-----------
under or relating to this Agreement or relating to the Executive's employment by
the Company, such dispute shall be submitted to and settled by arbitration in
the Commonwealth of Virginia in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association then in effect, by an
arbitrator or arbitrators selected in accordance with said rules. The
arbitrator(s) shall have the right and authority to determine how their award or
decision as to each issue and matter in dispute may be implemented or enforced.
Any decision or award shall be final and conclusive on the parties; there shall
be no appeal therefrom other than for claimed bias, fraud or misconduct by the
arbitrator(s); judgment upon any award or decision may be entered in any court
of competent jurisdiction in the Commonwealth of Virginia or elsewhere; and the
parties hereto consent to the application by any party in interest to any court
of competent jurisdiction for confirmation or enforcement of such award. The
party against whom a decision or award is made shall pay the fees of the
American Arbitration Association. Notwithstanding the foregoing, the Company, at
its sole option, shall be entitled to elect to enforce its rights contemplated
by Section 6(a) hereof relating to breaches of Section 4 or 5 hereof by
arbitration pursuant to a proceeding commenced by the Company in a court of
competent jurisdiction in lieu of an arbitration proceeding.

7. Termination of Employment.
-------------------------

(a) Death. The Executive's employment hereunder shall terminate in
-----
the event of Executive's death. Except for any salary and benefits accrued,
vested and unpaid as of the date of any such termination and except for any
benefits to which the Executive or his heirs or personal representatives may be
entitled under and in accordance with the terms of any employee benefit plan,
policy or program maintained by the Company, the Company shall be under no
further obligation hereunder to the Executive or his heirs or personal
representatives, and the Executive or his heirs and personal representatives no
longer shall be entitled to receive any payments or any other rights or benefits
under this Agreement.

4
<PAGE>

(b) Disability. The Company may terminate the Executive's employment
----------
hereunder for "Disability," if an independent physician mutually selected by the
Executive or his representative and the Board of Directors or its designee has
determined that the Executive has been substantially unable to render to the
Company services of the character contemplated by Section 2 of this Agreement,
by reason of a physical or mental illness or other condition continuing for more
than one hundred twenty (120) consecutive days or for shorter periods
aggregating more than one hundred eighty (180) days in any period of twelve (12)
consecutive months (excluding in each case days on which the Executive was on
vacation). In the event of such Disability, the Executive shall be entitled to
receive any salary and benefits accrued, vested and unpaid as of the date of any
such termination and any benefits to which the Executive may be entitled under
and in accordance with the terms of any employee benefit plan, policy or program
maintained by the Company. The Company shall be under no further obligation
hereunder to the Executive, and the Executive no longer shall be entitled to
receive any other payments, rights or benefits under this Agreement.

(c) Termination by the Company for Cause. The Company may terminate the
------------------------------------
Executive's employment hereunder for "Cause." For purposes of this Agreement,
"Cause" shall mean any of the following:

(i) The Executive's willful misconduct or gross negligence;

(ii) The Executive's conscious disregard of his obligations
hereunder;

(iii) The Executive's conscious violation of any material
provision of the Company's by-laws or of its other stated policies, standards or
regulations; or

(iv) A determination that the Executive has demonstrated a
dependence upon any addictive substance, including alcohol, controlled
substances, narcotics or barbiturates.

5
<PAGE>

benefit plan, policy or program maintained by the Company. This severance
benefit shall not be paid in the form of a lump sum and shall be paid over and
during the applicable period of months in accordance with the Company's standard
payroll practices. The Company shall be under no further obligation hereunder to
the Executive and the Executive shall not be entitled to receive any payments or
any other rights or benefits under this Agreement or otherwise.

(e) Termination by the Executive for Good Reason. Notwithstanding
--------------------------------------------
anything herein to the contrary, the Executive shall be entitled to terminate
his employment hereunder for "Good Reason" without breach of this Agreement. For
purposes of this Agreement, "Good Reason" shall exist in the event of any of the
following:

(i) A change in the Executive's place of employment outside of a
100-mile radius of the metropitan area of Denver, Colorado;

(ii) A material diminution in title or a substantial elimination
of the duties and responsibilities of the Executive; or

(iii) A material breach by the Company of its obligations
hereunder; or

(iv) The Executive shall cease to be the Senior Vice President
of the Company following a "change in control" of the Company. For purposes of
this Section 7(e)(iv), a "change in control of the Company" shall mean (A) the
acquisition, directly or indirectly, by any "person" (as such term is defined in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 as in effect on
the date hereof), of voting power over voting shares of the Company that would
entitle holders thereof to cast at least fifty percent (50%) of the votes that
all shareholders would be entitled to cast in the election of directors of the
Company; or (B) during any period of two consecutive years during the Initial
Term of this Agreement, individuals who at the beginning of such period
constitute the Company Board of Directors cease for any reason to constitute at
least a majority thereof, unless the election of each director who is not a
director at the beginning of such period shall have been approved in advance by
directors representing at least a majority of the directors then in office who
are directors at the beginning of such period.

6
<PAGE>

(f) Termination by the Executive for other than Good Reason. The
-------------------------------------------------------
Executive may terminate his employment hereunder at any time for any other
reason, provided the Executive has given the Company ninety (90) days' written
notice of termination, termination being effective upon expiration of the notice
period. In the event of such termination, the Executive shall be entitled to
receive any salary and benefits accrued, vested and unpaid as of the date of any
such termination and any benefits to which the Executive may be entitled under
and in accordance with the terms of any employee benefit plan, policy or program
maintained by the Company. The Company shall be under no further obligation
hereunder to the Executive and the Executive no longer shall be entitled to
receive any other payments, rights or benefits under this Agreement or
otherwise.

(g) Pro-Rata Bonus. Whenever, pursuant to this Section 7, the Executive
--------------
is entitled, upon the termination of his employment, to receive
"salary...accrued, vested and unpaid as of the date of any such termination",
the amount due him may include a pro-rata performance bonus, if it would be
appropriate to calculate a pro-rata portion of a performance bonus in accordance
with the provisions of any bonus plan which may have been implemented in
accordance with Section 3(b) hereof.

8. Place of Employment. The Company agrees that the principal location at
-------------------
which the Executive is to render his services hereunder will be Denver,
Colorado, unless a modification is understood and agreed to in writing by the
Executive and Company.

10. Survival. This Agreement shall survive any termination of the
--------
Executive's employment hereunder unless otherwise provided herein.

11. Miscellaneous.
-------------

7
<PAGE>

If to the Executive:

11500 East Dorado Avenue
Englewood, Colorado 80111

If to the Company:

Precision Auto Care, Inc.
748 Miller Drive, S.E.
P.O. Box 5000
Leesburg, Virginia 20175
Attention: President

(d) Waiver. The waiver of a breach of any term or provision of this
------
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.

(g) Indemnification. The Executive shall be entitled to the benefit of
---------------
the indemnification provided by the Charter and the Bylaws of the Company;
provided that the Company shall be permitted to amend such provisions from time
to time so long as the Executive, to the extent permitted by applicable law, is
afforded indemnification at least as favorable as that provided by the Charter
and Bylaws as in effect on the date hereof.

8
<PAGE>

(h) Captions. All captions and section headings used herein are for
--------
convenient reference only and do not form a part of this Agreement.

(i) Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall constitute one and the same Agreement.

(j) Computation of Time. In computing any period of time pursuant to
-------------------
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall be included, unless it is a Saturday, Sunday,
or a legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday. Likewise, if the period of
time concludes on a Saturday, Sunday or a legal holiday, the period shall run
until the end of the next day thereafter which is not a Saturday, Sunday, or
legal holiday.

(k) Pronouns and Plurals. All pronouns and any variations thereof shall
--------------------
be deemed to refer to the masculine, feminine, neuter, singular, or plural as
the identity of the person or persons may require.

(l) Prior Agreements. The Executive and the Company confirm that the
----------------
terms of this Employment Agreement shall supersede and replace in all respects
all of the terms and conditions set forth in any previous employment agreement
between the Executive and the Company, including, without limitation, the
Employment Agreement dated August 26, 1997.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first above written.

PRECISION AUTO CARE, INC.

_______________________________
Charles L. Dunlap
President and CEO

EXECUTIVE

_______________________________
William R. Klumb

<PAGE>

Exhibit 10.25

AMENDED AND RESTATED
--------------------
LOAN AND SECURITY AGREEMENT
---------------------------

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made between
PRECISION AUTO CARE, INC., a Virginia corporation ("PAC"), and certain of its
subsidiaries wholly-owned and/or controlled by it, namely, WE JAC CORPORATION, a
Delaware corporation; PRECISION BUILDING SOLUTIONS INCORPORATED, formerly known
as LUBE VENTURES, INC., a Delaware corporation; ROCKY MOUNTAIN VENTURES, INC., a
Colorado corporation; ROCKY MOUNTAIN VENTURES II, INC., a Colorado corporation;
MIRACLE PARTNERS, INC., a Delaware corporation; RALSTON CAR WASH, LTD., a
Colorado limited liability company; PREMA PROPERTIES, LTD., an Ohio limited
liability company; MIRACLE INDUSTRIES, INC., an Ohio corporation; KBG, LLC, a
Colorado limited liability company; PTW, INC., a Washington corporation;
NATIONAL 60 MINUTE TUNE, INC., a Washington corporation; HYDROSPRAY CAR WASH
EQUIPMENT CO., LTD., an Ohio limited liability company; PRECISION TUNE AUTO
CARE, INC., a Virginia corporation; WORLDWIDE DRYING SYSTEMS, INC., a Colorado
corporation; PAC MEXICAN DELAWARE HOLDING COMPANY, INC., a Delaware corporation;
PAC MEXICAN HOLDING COMPANY LLC, a Virginia limited liability company; PRECISION
AUTO CARE MEXICO II, S. de R.L. de C.V., a Mexican limited liability company;
PRECISION AUTO CARE MEXICO I, S. de R.L. de C.V., a Mexican limited liability
company; and INDY VENTURES, L.L.C., an Indiana limited liability company (each
of the foregoing and PAC are sometimes hereafter referred to individually as a
"Borrower" and collectively as the "Borrowers"), and FIRST UNION NATIONAL BANK,
as successor to SIGNET BANK (the "Bank).

IMPORTANT NOTICE

THIS INSTRUMENT CONTAINS A CONFESSION OF JUDGMENT PROVISION WHICH
CONSTITUTES A WAIVER OF IMPORTANT RIGHTS YOU MAY HAVE AS A DEBTOR AND ALLOWS THE
CREDITOR TO OBTAIN A JUDGMENT AGAINST YOU WITHOUT ANY FURTHER NOTICE.

Recitals
--------

A. The Borrowers are indebted to the Bank under a Second
Consolidated, Amended and Restated Revolving and Acquisition Line of Credit
Promissory Note dated October 1, 1998 in the face amount of $25,000,000 (the
"Note").

B. The Note evidences a Line of Credit (as defined below) and an
Acquisition Line of Credit (as defined below) (which is treated on the Bank's
books as a series of term loans).

<PAGE>

C. As of February 1, 1999, there was due on the Line of Credit
$8,805,999.90 in principal and ($4,988.19) in interest.

D. As of February 1, 1999, the following term loans were outstanding
under the Acquisition Line of Credit, and had the following principal and
interest balances:

1. Loan in the original amount of $467,723.60, on which principal
is $327,207.32 and interest is ($203.51);

2. Loan in the original amount of $2,296,000.00, on which
principal is $2,132,000.00 and interest is 0-;

3. Loan in the original amount of $1,704,867.15, on which
principal is $1,585,227.35 and interest is 0-;

4. Loan in the original amount of $1,552,136.57, on which
principal is $1,445,092.65 and interest is 0-; and

5. Loan in the original amount of $4,949,999.98, on which
principal is $4,583.333.30 and interest is 0-.

E. Payment of the Note is secured by a security interest in the
personal property collateral described in a Loan and Security Agreement dated
November 12, 1997, as amended by instruments dated March 31, 1998, May 12, 1998
and October 1, 1998.

F. PAC is a holding company which conducts business through its
Subsidiaries (as hereafter defined).

G. Because of the ownership relation and the other relationships
described hereafter, PAC and all Subsidiaries have requested the Bank to provide
credit upon the terms and conditions stated herein.

H. PAC is the sole or controlling, direct or indirect, owner of all
of the issued and outstanding capital stock or other equity interests of all of
the Subsidiaries. Each Borrower is a separate legal entity, however, and in
addition to the ownership affiliation, each Borrower will be actively engaged in
interwoven and ongoing business and financial relationships with PAC and the
other Subsidiaries in the conduct of their respective but related businesses.
These relationships include: (a) centralized accounting, data processing,
payroll and other administrative services; (b) the sharing of common
administrative (e.g., legal, accounting, etc.) services; (c) common management
and the utilization of personnel for common services such as purchasing and
administrative services; (d) the purchase and exchange of goods and services
among the Borrowers; (e) the providing by PAC of substantial financial support
to its Subsidiaries through loans; (f) the filing of consolidated federal tax
returns by PAC and a substantial number of the Subsidiaries; and (g) other
contemplated business accommodations by and between the Borrowers. Because of
the affiliation and inter-relationship of the Borrowers, in

-2-
<PAGE>

law and in fact, and because of the economic dependence of one on the other, and
further because each Borrower is joining in the execution hereof for the purpose
of inducing the Bank to enter into this Amended and Restated Loan and Security
Agreement, each Borrower promises to pay all Obligations (as hereafter defined)
regardless of which Borrower requested and/or received, directly or indirectly,
the proceeds or benefit of any Loan (as hereafter defined). For purposes of this
Amended and Restated Loan and Security Agreement, each Borrower joins as a co-
maker, and the liability of each co-maker shall be joint and several for the
repayment of all Loans, interest thereon and all other Obligations, and the
performance of all terms, conditions and provisions of this Amended and Restated
Loan and Security Agreement. The Loans may be made to one Borrower for the use
and benefit of one or more other Borrowers, and each Borrower may act as and be
the agent of each other Borrower; the Collateral of each Borrower shall be
Collateral for all Obligations arising hereunder, regardless of which Borrower
incurred the Obligations; notice to PAC or any other Borrower shall constitute
notice to all Borrowers; a request for a Loan by PAC for its use or for the use
of another Borrower shall be valid and binding on all Borrowers. Each Subsidiary
designates, constitutes and appoints PAC as its true and lawful attorney-in-fact
to act for it and on its behalf under this Amended and Restated Loan and
Security Agreement in all respects, and any action taken by PAC with respect to
any Subsidiary shall be binding on both. No action now or hereafter taken by the
Bank for administrative purposes or otherwise, including, without limitation,
recording this transaction on its books and records in the name of PAC,
administering the Loans through one deposit account, collateral account or other
account or accounts, notifying or dealing with one Borrower to the exclusion of
any other shall be, or shall be deemed to be, a waiver or relinquishment of any
right, power or remedy with respect to all Borrowers nor a release of any
Borrower from strict performance and unconditional liability under this Amended
and Restated Loan and Security Agreement.

I. The Borrowers acknowledge that they have benefited from the making
of the Loans.

J. The Borrowers have advised the Bank that they anticipate
consummating (with the Bank's consent) the following transactions:

1. On or about January 29, 1999, PAC obtained a Five Million
Dollar ($5,000,000.00) unsecured loan from Art Kellar, a director of PAC,
pursuant to the Subordinated Debenture attached as Exhibit No. 1 (the
-------------
"$5,000,000 Subordinated Debt"). The Bank acknowledges that PAC has paid to the
Bank all of the loan proceeds of $5,000,000, which the Bank has applied as
follows: $2,500,000.00 against the Line of Credit and $2,500,000.00 against the
Acquisition Line of Credit. The application of $5,000,000 in loan proceeds
against the Line of Credit and the Acquisition Line of Credit is reflected in
the balance figures set forth in Recitals C and D.

2. On or before February 25, 1999, the Borrowers expect to close
on mortgage financing with Heartland Bank (the "Heartland Bank Financing") and
realize One Million Dollars ($1,000,000.00) in loan proceeds. The collateral for
this Heartland Bank

-3-
<PAGE>

Financing will be certain car wash centers located in Ohio. The Heartland Bank
Financing will have a ten-year term, a 20-year amortization, and a fixed rate of
8.75% for five years.

3. On or before February 25, 1999, the Borrowers expect to close on
the sale of the real estate and business assets located at 1458 Park Avenue
West, Mansfield, Ohio 44906 and 165 Ashland Road, Mansfield, Ohio 44905 (the
"Mansfield Sale Transaction"). This real estate is owned by Miracle Industries,
Inc. The Borrowers expect to receive sale proceeds of One Million Three Hundred
Fifty Thousand Dollars ($1,350,000.00).

4. On or before March 25, 1999, the Borrowers expect to close on the
sale of real estate and business assets to KRK Auto Wash, Ltd. located at (a)
7220 Brook Park Road, Brook Park, Ohio; (b) 5000 SOM Center Road, Willoughby,
Ohio; (c) 950 E. 222, Euclid, Ohio; (d) 14755 Snow Road, Brook Park, Ohio; and
(e) 5693 Chevrolet Boulevard, Parma, Ohio (the "Cleveland Sale Transaction").
This real estate is owned by Prema Properties, Ltd. The Borrowers expect to
receive sale proceeds of Two Million Eight Hundred Thousand Dollars
($2,800,000.00).

5. On or before March 25, 1999, the Borrowers expect to close on the
sales of three auto care centers and three car washes to Maxi Ideas, Inc.,
located at (a) 2537 Brice Road, Columbus, Ohio; (b) 1215 Morse Road, Columbus,
Ohio; (c) 3878 Snouffer Road, Columbus, Ohio; (d) 255 East Warren Road, Bucyrus,
Ohio; (e) 5490 Olive Road, Dayton, Ohio; and (f) 817 East Main Street,
Crestline, Ohio (the "Columbus Sale Transaction"). This real estate is owned by
Miracle Industries, Inc. and by Indy Ventures, LLC. The Borrowers anticipate
receiving One Million Six Hundred Thousand Dollars ($1,600,000.00) in sale
proceeds. Up to $400,000 of the proceeds may be in the form of a deferred
purchase money note.

6. On or before April 25, 1999, the Borrowers expect to refinance
certain real property with FFCA or an alternative lender and receive net loan
proceeds of $7,500,000.00 (the "FFCA Financing").

K. The Borrowers have requested that the Bank modify certain terms and
provisions of the Loan and Security Agreement, as amended, and the Bank is
agreeable to doing so, subject to and as evidenced by the execution of this
Amended and Restated Loan and Security Agreement. All Borrowers join in the
execution hereof and the joint and several undertakings herein to induce the
Bank to make the requested modifications to the Loan and Security Agreement, as
amended.

NOW, THEREFORE, in consideration of the premises, the covenants and
agreements of the parties hereafter set forth, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties, intending to be legally bound, agree as follows:

-4-
<PAGE>

ARTICLE I
---------
Definitions
-----------

As used in this Amended and Restated Loan and Security Agreement, the
following terms shall have the meanings set forth as definitions, unless the
specific context clearly requires a different meaning, and all terms defined in
this Article, or elsewhere herein, shall be capitalized throughout this Amended
and Restated Loan and Security Agreement. Terms defined in the Uniform
Commercial Code of Maryland or of any other state in which any portion of the
Collateral may be located shall have the meanings ascribed to them in the
applicable uniform commercial code, and all financial terms not otherwise
defined shall have those meanings as determined under generally accepted
accounting principles, as recognized by the American Institute of Certified
Public Accountants ("GAAP"). The plural use of any defined term shall include
the singular, and the singular use of any defined term shall include the plural.

Section 1.1. Account Debtor. The term "Account Debtor" shall mean
--------------
any Person who is obligated to pay a Receivable to any Borrower.

Section 1.2. Accounts, Chattel Paper, Documents, Inventory,
----------------------------------------------
Securities, Equipment, General Intangibles and Instruments. The terms
- ----------------------------------------------------------
"Accounts," "Chattel Paper," "Documents," "Inventory," "Securities,"
"Equipment," "General Intangibles" and "Instruments" shall have the same
respective meanings as are given to those terms in the Maryland Uniform
Commercial Code-Secured Transactions, Title 9, Commercial Law Article, Annotated
Code of Maryland, as amended.

Section 1.3. Acquisition. The term "Acquisition" shall mean any
-----------
acquisition, whether in a single transaction or series of related transactions,
by PAC or any one or more of its Subsidiaries, or any combination thereof, of
(i) all, or substantially all, of the assets, equity or a going business or
division, of any Person, whether through purchase of assets or securities, by
merger or otherwise, (ii) control of at least eighty percent (80%) of the
outstanding securities of an existing corporation ordinarily (and apart from
rights accruing under special circumstances) having the right to vote in the
election of directors, or (iii) control of a greater than eighty percent (80%)
ownership interest in any existing partnership, joint venture or other Person.

Section 1.4. Acquisition Costs. (intentionally deleted)
-----------------

Section 1.5. Acquisition Line of Credit. The term "Acquisition Line
--------------------------
of Credit" shall mean those Advances evidenced by the term loans described in
the Recitals, and by the Consolidated Note.

Section 1.6. Acquisition Line of Credit Note. (intentionally
-------------------------------
deleted).

Section 1.7. Advances. The term "Advances" shall mean each credit to
--------
PAC's Deposit Account based on a request from PAC for borrowing as provided in
Article II herein, or

-5-
<PAGE>

any extension of credit under the Line of Credit as herein provided, regardless
of whether a specific request has been made therefor.

Section 1.8. Affiliate. The term "Affiliate" shall mean any
---------
corporation, (including all of the Subsidiaries), partnership, limited liability
company, limited liability partnership or other Person of which more than fifty
percent (50%) of the legal or beneficial ownership interests are held, directly
or indirectly, by PAC or any other Borrower, or which is otherwise controlled,
directly or indirectly, through one or more intermediaries, or both, by PAC.

Section 1.9. Agent. The term "Agent" shall mean PAC as exclusive
-----
agent for all of the Subsidiaries to act for and on behalf of each and all of
them, individually and collectively, to request Advances, receive notices,
accept service of process and take all actions deemed necessary in connection
with this Agreement, the Loans and the Consolidated Note.

Section 1.10. Agreement. The term "Agreement" shall mean this
---------
Amended and Restated Loan and Security Agreement, as amended, restated, extended
or modified from time to time, together with all attachments and exhibits hereto
or thereto.

Section 1.10A. Adjusted EBITDA. The term "Adjusted EBITDA" shall
---------------
mean as of the end of each fiscal quarter, the consolidated EBITDA of all
Borrowers less any net increase during such fiscal quarter in income
attributable to any receivable, royalty or deposit which is over 90 days past
due (the "Past Due Items"), any franchise, area subfranchise or master license
fees or any other current year revenue financed by notes or other instruments
and not otherwise included in the Past Due Items, and any other non-cash revenue
items reflected in Consolidated Net Income, however, the amount of the current
bad debt expense and other agreed upon adjustments shall be added to
Consolidated Net Income provided such amount does not exceed the amount of Past
Due Items for such period.

Section 1.11. Annualized Adjusted EBITDA. The term "Annualized
--------------------------
Adjusted EBITDA" shall mean with respect to the Borrowers, on a consolidated
basis and as of the end of each fiscal quarter, the sum of Adjusted EBITDA for
the immediately preceding four fiscal quarters; plus the trailing twelve-month
Adjusted EBITDA of any acquired Subsidiary which becomes a Borrower so long as
the computation of such trailing Adjusted EBITDA can be determined to the Bank's
satisfaction from audited financial statements or other information deemed
reliable by the Bank.

Section 1.12. Annualized Adjusted EBITDAR. The term "Annualized
---------------------------
Adjusted EBITDAR" shall mean with respect to the Borrowers, on a consolidated
basis and as of the end of each fiscal quarter, the sum of the Annualized
Adjusted EBITDA for the immediately preceding four fiscal quarters, plus Rent
Expense for such period.

Section 1.12A. Annualized EBITDA. The term "Annualized EBITDA" shall
-----------------
mean with respect to the Borrowers, on a consolidated basis and as of the end of
each fiscal quarter, the sum of EBITDA for such quarter and for the three fiscal
quarters immediately

-6-
<PAGE>

preceding such quarter, as reported in the Forms 10Q and 10K (as applicable)
filed by PAC with the Securities and Exchange Commission.

Section 1.12B. Annualized EBITDAR. The term "Annualized EBITDAR"
------------------
shall mean with respect to the Borrowers, on a consolidated basis and as of the
end of each fiscal quarter, the sum of the Annualized EBITDA for the period
ending on such date, plus Rent Expense for such four quarters.

Section 1.13. Applicable Margin. (intentionally deleted).
-----------------

Section 1.14. Assumption Agreement. The term "Assumption Agreement"
--------------------
shall mean an agreement in which a corporation or other business entity
previously or hereafter acquired, directly or indirectly, or subsequently
created, and which otherwise qualifies as a Subsidiary, agrees to be bound by
the terms of this Agreement and assumes joint and several liability for
repayment of the Consolidated Note and all other Obligations.

Section 1.15. Available Loan Amount. (intentionally deleted)
---------------------

Section 1.16. Base Rate. (intentionally deleted).
---------

Section 1.17. Borrower. The term "Borrower" or "Borrowers" shall
--------
mean PAC and all of the additional parties identified on the first page of this
Agreement which are Subsidiaries owned and controlled by PAC, and shall also
include such other Persons hereafter qualifying as a Subsidiary which execute
and deliver to the Bank an Assumption Agreement.

Notwithstanding the fact that none of Promotora de Franquicias Praxis,
S.A. de C.V., a Mexican corporation ("PFP"), or any of the "Praxis Companies" as
defined in that certain Subscription and Stock Purchase Agreement made as of
March 31, 1998, by and among PAC, PAC Mexico I and the stockholders of PFP (the
"PFP Purchase Agreement," and all of such entities, collectively, the "Non-
Borrower Mexican Subsidiaries") will enter into an Assumption Agreement and
become a party to this Agreement as a Borrower thereunder, the terms "Borrower"
and "Subsidiary" as used in this Agreement shall include the Non-Borrower
Mexican Subsidiaries for the following purposes:

(a) The definitions of "Adjusted EBITDA," "Annualized Adjusted
EBITDA," "Consolidated Liabilities," "Consolidated Net Income," "Consolidated
Tangible Net Worth," "EBITDA," "Material Adverse Change" and "Material Adverse
Effect" in this Agreement; provided, however, that the trailing twelve-month
Adjusted EBITDA of the Non-Borrower Mexican Subsidiaries will only be included
in Annualized Adjusted EBITDA if and so long as the computation thereof can be
determined to the Bank's satisfaction from audited financial statements or other
information deemed reliable by the Bank.

(b) The representations and warranties of the Borrowers under Sections
5.1, 5.2, 5.3, 5.4, 5.10, 5.13, 5.15, 5.17, 5.20 and 5.25 of this Agreement;

-7-
<PAGE>

(c) The affirmative covenants of the Borrowers contained in Sections
6.4, 6.6, 6.7, 6.8, 6.11, 6.12, 6.13, 6.15, 6.16, 6.17, 6.18 and 6.19 of the
Loan Agreement; provided, however, that (a) for purposes of such Sections the
covenant and agreement of the Borrowers which are parties to this Agreement
shall be to cause the Non-Borrower Mexican Subsidiaries to comply with the
provisions thereof, and (b) it is understood and agreed that the fiscal year of
PAC shall end on June 30 of each year;

(d) The negative covenants of the Borrowers contained in Sections 7.1,
7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 7.17 and 7.18 of this
Agreement; provided, however, that (a) for purposes of such Sections the
covenant and agreement of the Borrowers which are parties to this Agreement
shall be not to cause or permit the Non-Borrower Mexican Subsidiaries to violate
any of the provisions thereof, and (b) the contingent obligations of the Non-
Borrower Mexican Subsidiaries identified in Exhibit No. 2 attached hereto shall
-------------
not represent a violation of the provisions of Subsection 7.7 of this Agreement;
and

(e) The Events of Default under Sections 8.7, 8.8, 8.9, 8.10, 8.11,
8.12 and 8.13 of this Agreement.

Section 1.18. Business Day. The term "Business Day" shall mean any
------------
day other than a Saturday, Sunday or legal holiday or days on which banking
institutions are authorized or obligated to close under the laws of the United
States or the State of Maryland.

Section 1.19. Closing. (intentionally deleted).
-------

Section 1.20. Collateral. The term "Collateral" shall mean all of
----------
the tangible and intangible property with respect to which the Borrowers have
granted a security interest or lien to the Bank pursuant to the terms of this
Agreement or any of the other Loan Documents.

Section 1.21. Combination. (intentionally deleted).
-----------

Section 1.22. Compliance Certificate. The term "Compliance
----------------------
Certificate" shall mean the certificate executed by the chief executive officer
or chief financial officer of PAC and delivered to the Bank at the end of each
fiscal quarter indicating the Borrowers' compliance with all financial covenants
contained herein and the absence of any Event of Default, all in the form as
provided in Exhibit No. 3 attached hereto.
-------------

Section 1.23 Consolidated Liabilities. The term "Consolidated
------------------------
Liabilities" shall mean, on a consolidated basis, the aggregate liabilities of
the Borrowers, less Subordinated Debt.

Section 1.24. Consolidated Net Income. The term "Consolidated Net
-----------------------
Income" shall mean, for any fiscal period, the net income (or loss) of PAC and
its Subsidiaries, on a consolidated basis and excluding intercompany items, for
such quarter, determined in accordance with GAAP, but excluding as income: (a)
gains on the sale, conversion or other disposition of capital assets, (b) gains
on the acquisition, retirement, sale or other disposition of stock or

-8-
<PAGE>

securities of PAC or any of its Subsidiaries, (c) gains on the collection of
life insurance proceeds, (d) any write-up of any asset, and (e) any other gain
or credit of an extraordinary nature.

Section 1.24A. Consolidated Note. The term "Consolidated Note" shall
-----------------
mean the Third Consolidated, Amended and Restated Revolving and Acquisition Line
of Credit Promissory Note effective February 1, 1999, executed by the Borrowers
as obligors, in the original principal amount of Twenty-one Million Seventy-two
Thousand Eight Hundred Sixty Dollars and Sixty-two cents ($21,072,860.62) and
payable to the order of the Bank, and any and all substitutions, extensions,
renewals, amendments, restatements, modifications or replacements thereof.

Section 1.25. Consolidated Tangible Net Worth. The term
-------------------------------
"Consolidated Tangible Net Worth" shall mean, on a consolidated basis, the
aggregate amount of Borrowers' total assets, exclusive of goodwill, trademarks,
trade names, licenses and such other assets as Bank may determine from time to
time are properly classified as intangible assets, less Consolidated
Liabilities, plus Bank-approved Subordinated Debt, if any.

Section 1.26. Deposit Account. The term "Deposit Account" shall mean
---------------
PAC's deposit account(s) established and maintained with the Bank for the
benefit of itself and all other Borrowers, or any substitute or additional
account(s), to be utilized as the means of advancing funds under the Line of
Credit.

Section 1.26A. Domestic Acquisition. (intentionally deleted)
--------------------

Section 1.27 EBITDA. The term "EBITDA" shall mean, with respect to
------
PAC and its Subsidiaries, on a consolidated basis as of the last day of any
fiscal quarter, the aggregate of (a) Consolidated Net Income for the immediately
preceding fiscal quarter then ended, plus (b) the sum of interest, taxes,
depreciation and amortization (to the extent taken into the calculation of
Consolidated Net Income for such period).

Section 1.28. ERISA. The term "ERISA" shall mean the Employee
-----
Retirement Income Security Act of 1974, as amended, and all regulations or
rulings promulgated thereunder.

Section 1.29. Event of Default. The term "Event of Default" shall
----------------
mean the events constituting defaults under this Agreement as set forth in
Article VIII hereof.

Section 1.29A. Foreign Acquisition. (intentionally deleted)
-------------------

Section 1.30. Total Funded Debt/Annualized EBITDA Ratio. The term
-----------------------------------------
"Total Funded Debt/Annualized EBITDA Ratio" shall mean, on a consolidated basis,
as of the end of each fiscal quarter, the ratio of Total Funded Debt to
Annualized EBITDA.

Section 1.31. Governing Documents. The term "Governing Documents"
-------------------
shall mean the articles of incorporation, certificate of incorporation, charter
or other organizational instrument of a corporation, the articles of
organization and operating agreement of a limited

-9-
<PAGE>

liability company, a partnership or joint venture agreement of any partnership,
limited liability partnership or joint venture, and the by-laws or other rules
for the governance of any such Person.

Section 1.32. Laws. The term "Laws" shall mean all ordinances,
----
statutes, rules, regulations, orders, injunctions, writs or decrees of any
government or political subdivision or agency.

Section 1.33. Letter of Credit. (intentionally deleted). The Bank
----------------
has not issued any standby or commercial letters of credit for the account of
the Borrower, and will not honor any request to do so.

Section 1.34. LIBOR Rate. The term, "LIBOR Rate" means a per annum
----------
rate of interest, as determined by the Bank in its sole discretion and changed
as of the first day of each month during the term of this Agreement, equal to
the London Interbank Offered Rate (adjusted to reflect the cost of insurance
premiums and reserve requirements as they exist from time to time) published by
Bloomberg or Dow Jones-Telerate, as BBA LIBOR on page 3750 (or by Reuters
Monitor Money Rates Service (LIBOR page), if Bloomberg or Dow Jones-Telerate is
not available), or such other page as may replace that page on that service for
the purpose of displaying rates or prices comparable to that rate (rounded
upwards, if necessary, to the next higher 1/100%), for deposits in U.S. dollars
on the first day of each such month, for a period of thirty (30) days (an
"Interest Period"). If more than one such rate appears on such page or its
replacement, LIBOR Rate shall be the arithmetic mean of such rates. If the first
day of any such month is not a Business Day, the applicable LIBOR Rate shall be
the rate in effect on the immediately preceding Business Day.

Section 1.35. Line of Credit. The term "Line of Credit" shall mean
--------------
those Advances, readvances and other credit accommodations and Loans provided
under this Agreement or the Loan and Security Agreement (as amended) for working
capital and other ordinary course working capital purposes, as evidenced by the
Consolidated Note, made from time to time in accordance with the terms of this
Agreement or the Loan and Security Agreement (as amended).

Section 1.36. Line of Credit Note. (intentionally deleted).
-------------------

Section 1.37. Liquidation Costs. The term "Liquidation Costs" shall
-----------------
mean any and all costs and expenses (including actual and reasonable attorneys'
fees and legal expenses) which are incurred by or on behalf of the Bank (a) to
enforce payment of any of the Obligations, (b) to enforce payment of any
Receivable following the occurrence of an Event of Default, whether as against
an Account Debtor, the Borrowers or any surety of any Account Debtor or of any
of the Obligations, (c) in the prosecution or defense of any action growing out
of or connected with the Collateral or any of the Bank's rights therein or
thereto, and (d) in connection with the custody or preservation of the
Collateral following the occurrence of an Event of Default, and the preparation
for sale, sale or other disposition of any Collateral.

-10-
<PAGE>

Section 1.38. Loan. The term "Loan" or "Loans" shall mean all monies
----
advanced under the Line of Credit and the Acquisition Line of Credit and the
Consolidated Note, including future Advances and readvances, whether now
existing or hereafter arising, including any amendments, extensions,
modifications thereto or replacements or substitutions therefor.

Section 1.39. Loan Documents. The term "Loan Documents" shall mean
--------------
all documents executed by the Borrowers in connection with the Loan, including,
but not limited to, this Agreement, the Loan and Security Agreement (as
amended), the Consolidated Note, the Trademark Assignment, the Pledge Agreement,
appropriate financing statements and continuation statements, or any amendments,
extensions or modifications thereof or thereto.

Section 1.40. Material Adverse Change. The terms "Material Adverse
-----------------------
Change" or "Material Adverse Effect" shall mean, in the good faith opinion of
the Bank, and subject to any applicable cure or grace periods, a material
adverse effect upon, or a material adverse change in, any of (a) the financial
condition, operations, business or properties of PAC and/or its Subsidiaries,
taken as a whole; (b) the ability of PAC and its Subsidiaries taken as a whole
to perform under any Loan Document or any other material contract to which any
of them are parties; (c) the legality, validity or enforceability of any Loan
Document; (d) the perfection or priority of the liens of the Bank granted under
the Loan Documents or the rights and remedies of the Bank under the Loan
Documents; or (e) the condition or value of any material portion of the
Collateral.

Section 1.41. Maturity. The term "Maturity" shall mean September 30,
--------
1999, the date on which all Loans and Obligations, all accrued interest, and all
other fees, costs and expenses provided for herein, in the Consolidated Note or
the other Loan Documents shall be due and payable, in full, or such earlier date
upon acceleration as provided herein or in the Consolidated Note.

Section 1.41A. Maximum Loan Amount. The term "Maximum Loan Amount"
-------------------
shall mean the sum of (a) the Line of Credit Portion (as defined in Section 2.1
hereof), plus (b) the outstanding principal balance of the Acquisition Line of
Credit. The Maximum Loan Amount is subject to reduction in the manner provided
in Section 2.4 hereof, and from and after April 25, 1999, the Line of Credit
Portion of the Maximum Loan Amount shall be Four Million Dollars ($4,000,000).

Section 1.41B. Net CARS Transaction Proceeds. (intentionally
-----------------------------
deleted).

Section 1.41C. Net Mortgage Loan Proceeds. The term "Net Mortgage
--------------------------
Loan Proceeds" shall mean the gross proceeds to or for the account of any of the
Borrowers in connection with any transaction pursuant to which any real property
of any of the Borrowers has been encumbered or otherwise made subject to any
lien, minus the reasonable and customary transaction costs payable by the
Borrowers in connection therewith.

Section 1.41D. Net Sale Proceeds. The term "Net Sale Proceeds" shall
-----------------
mean the gross proceeds payable to or for the account of a Borrower in
connection with a sale of a

-11-
<PAGE>

Borrower's assets, minus the reasonable and customary transaction costs payable
by the Borrower in connection with the closing thereof.

Section 1.42. Notes. (intentionally deleted).
-----

Section 1.43. Obligations. The terms "Obligation" or "Obligations"
-----------
shall mean any joint or several obligation of payment or performance by the
Borrowers owing to the Bank, including: (a) any and all sums due to the Bank
under the Loan or otherwise under the terms of this Agreement, the Consolidated
Note, and the Loan Documents; (b) any and all sums advanced by the Bank to
preserve or protect the Collateral and the value of the Collateral or to
preserve, protect, or perfect the Bank's security interest in the Collateral;
(c) in the event of any proceeding to enforce the collection of the Obligations
or any of them, the reasonable expenses of retaking, holding, preparing for
sale, selling or otherwise disposing of or realizing on the Collateral, or of
any exercise by the Bank of the Bank's rights upon the occurrence of an Event of
Default, together with the actual and reasonable attorneys' fees, expenses of
collection, and court costs as provided in the Loan Documents; (d) the
Liquidation Costs; and (e) any other indebtedness, overdraft or liability of the
Borrowers to the Bank, whether direct or indirect, joint or several, absolute or
contingent, now existing or hereafter arising.

Section 1.44. Permitted Acquisition. (intentionally deleted)
---------------------

Section 1.45. Permitted Liens. The term "Permitted Liens" shall mean
---------------
(a) liens or security interests in favor of the Bank; (b) existing liens
described in Exhibit No. 4 attached hereto and incorporated herein by this
-------------
reference (including the "Grimaud Lien" as identified in Exhibit No. 4); (c)
-------------
liens arising or created in the future with the prior written consent of the
Bank or as otherwise permitted herein; and (d) purchase money security interests
in Equipment which (i) attach concurrently or within ten (10) days after
acquisition thereof, or (ii) are permitted under Section 2.2.10 hereof.
Permitted Liens shall also include:

(i) Liens for current taxes, assessments or other governmental
charges that are not delinquent or remain payable without any governmental
charges or remain payable without any penalty or that are being contested in
good faith and with due diligence by appropriate proceedings, provided that all
such liens in the aggregate have no Material Adverse Effect and, if reasonably
requested by the Bank, PAC or such Subsidiary has established reserves
reasonably satisfactory to the Bank with respect thereto;

(ii) Easements, rights of way, restrictive covenants, conditions,
zoning restrictions and other similar encumbrances on real estate that do not
materially impair the value of the property to which they relate;

(iii) Carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course of business that
are not overdue for a period of more than thirty (30) days, or, if overdue for
more than thirty (30) days, (i) which are being contested in good faith and by
appropriate proceedings; (ii) for which adequate reserves in

-12-
<PAGE>

accordance with GAAP have been established on the books of PAC or the
appropriate Subsidiary; and (iii) with respect to which the obligations secured
thereby are immaterial;

(iv) Pledges or deposits in connection with workers' compensation
insurance, unemployment insurance and like matters;

(v) Deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; and

(vi) Liens in respect of any writ of execution, attachment,
garnishment, judgment or award in an amount less than $100,000, the time for
appeal or petition for rehearing of which shall not have expired, or in respect
of which an appeal or appropriate proceeding for review is being prosecuted in
good faith and a stay of execution pending such appeal or proceeding for review
has been secured.

Section 1.46. Pledge Agreements. The term "Pledge Agreements" shall
-----------------
mean the Pledge Agreements executed and delivered by PAC and certain of its
Subsidiaries in favor of the Bank.

Section 1.47. Person. The term "Person" shall mean any individual,
------
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, limited liability company, or
limited liability partnership.

Section 1.48. Receivables. As used herein, the term "Receivables"
-----------
shall mean all of the Borrowers' Accounts, Instruments, Documents, Chattel
Paper, General Intangibles, notes, notes receivable, royalties, franchise fees,
reimbursements, commissions, fees, choses in action, and all other rights or
entitlements to moneys or property payable by a Person to PAC or any Subsidiary,
now existing or hereafter created or arising, and all cash and non-cash proceeds
and products thereof, and all rights thereto including rights in rejected,
returned or repossessed goods arising from the sale of or providing of goods or
services by the Borrowers.

Section 1.49. Records. The term "Records" shall mean correspondence,
-------
memoranda, tapes, discs, papers, books and other documents or transcribed
information of any type, whether expressed in ordinary or machine language,
maintained by the Borrowers in connection with the Collateral or their business
operations.

Section 1.50. Regulation G. The term "Regulation G" shall mean
------------
Regulation G of the Board of Governors of the Federal Reserve System, 12 C.F.R.
Part 207, or any successor or other regulation hereafter promulgated by the
Board to replace the prior Regulation G and having substantially the same
function.

Section 1.51. Regulation U. The term "Regulation U" shall mean
------------
Regulation U promulgated by the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 221, or

-13-
<PAGE>

any successor or other regulation hereafter promulgated by the Board to replace
the prior Regulation U and having substantially the same function.

Section 1.52. Regulation X. The term "Regulation X" shall mean
------------
Regulation X promulgated by the Board of Governors of the Federal Reserve
System, 12 C.F.R. Part 224, or any successor or other regulation hereafter
promulgated by the Board to replace the prior Regulation X and having
substantially the same function.

Section 1.53. Rent Expense. The term "Rent Expense" shall mean, for
------------
any period, all amounts paid, payable or accrued during such period by the
Borrower and its Subsidiaries on a consolidated basis with respect to all
operating leases of real and personal property, excluding intercompany items.

Section 1.54. Seller Debt. (intentionally deleted)
-----------

Section 1.55. Subsidiary. The term "Subsidiary" or, collectively,
----------
the "Subsidiaries", shall include all of the Borrowers named herein except PAC,
and any other corporate or other entity now or hereafter created, acquired or
organized in which at least eighty percent (80%) or more of the voting control
and legal and beneficial equity interests therein is held, directly or
indirectly, by PAC or any other Borrower, or any combination thereof.

Section 1.56. Subordinated Debt. The term "Subordinated Debt" shall
-----------------
mean any and all indebtedness and liabilities of PAC or any other Borrower (a)
which has been subordinated to the Loans and the other Obligations pursuant to a
written agreement (including the express written terms of the subordinated
indebtedness instruments) in form and substance acceptable to the Bank, and (b)
has been incurred pursuant to written agreements in form and substance
acceptable to the Bank and, if required by the Bank, such covenants of any of
the Borrowers contained therein have been incorporated herein as the Bank may
require.

Section 1.57. Total Funded Debt. The term "Total Funded Debt" shall
-----------------
mean (a) the aggregate amount of all interest bearing obligations of the
Borrowers, including, without limitation, monies borrowed, capital leases, or
any indebtedness secured by any lien, security interest or title retention
device (including, without limitation, any amount owed which is secured by the
Grimaud Lien), minus (b) Subordinated Debt.

Section 1.58. Trademark Assignment. The term "Trademark Assignment"
--------------------
shall mean any of the Trademark Assignments executed, delivered and acknowledged
by PAC and other Subsidiaries, assigning to the Bank a lien upon such registered
trademarks identified therein. All such Trademark Assignments shall be in form
suitable for recordation in the United States Patent and Trademark Office.

Section 1.59. Unused Line Fee. (intentionally deleted).
---------------

-14-
<PAGE>

ARTICLE II
----------
TERMS AND PURPOSE OF THE LOANS
------------------------------

Section 2.1. The Line of Credit Loan. The Bank agrees to make
-----------------------
Advances to PAC under the Line of Credit during the term of this Agreement in an
amount not to exceed Eleven Million Dollars ($11,000,000 (the "Line of Credit
Portion"); provided, however, that the Line of Credit Portion is subject to
permanent reduction in the manner provided in Section 2.4 hereof. The
obligation of the Borrowers to repay the Advances under the Line of Credit shall
be evidenced by the Consolidated Note. Subject to the limitations provided
herein, the Borrowers may borrow, repay and reborrow under the Line of Credit
and under the Consolidated Note.

Section 2.1.1. Purpose of the Line of Credit. The Borrowers may use
-----------------------------
the proceeds of the Line of Credit Loan for the financing of Receivables, for
other general working capital needs, and for the financing of capital
expenditures; provided, however, that proceeds of the Line of Credit Loan may
also be used to pay accrued interest on, and scheduled installments of principal
with respect to Advances outstanding under, the Acquisition Line of Credit.

Section 2.1.2. Interest Rate. Advances under the Line of Credit
-------------
shall bear interest at the LIBOR Rate plus 4.75%. Interest shall be calculated
based upon a year of 360 days and the actual number of days elapsed. The LIBOR
Rate shall be determined as of the first day of each month. The Line of Credit
shall be evidenced by, and shall be repaid with interest in accordance with, the
provisions of the Consolidated Note which shall be duly executed and delivered
by the Borrowers to the Bank on the date hereof, and the terms and conditions of
which are incorporated herein by reference. The date and amount of each Advance
made by the Bank and each payment made by the Borrowers shall be recorded by the
Bank on the books and records of the Bank, but any failure to record such dates
or amounts shall not relieve the Borrowers of their obligation of repayment
hereunder or under the Consolidated Note.

Section 2.1.3. Line of Credit Fees. (intentionally deleted).
-------------------

Section 2.1.4. Advances under the Line of Credit. Subject to
---------------------------------
compliance by the Borrowers with all of the terms and conditions of this
Agreement, the continued satisfactory financial condition of the Borrowers, the
satisfaction of all conditions precedent to the making of Advances hereunder and
the non-existence of any Event of Default or any event, circumstance, act or
omission which with the giving of notice, the passage of time, or both, would
constitute an Event of Default hereunder, upon the written request of PAC
directed to either John G. Dumm or Douglas A. Carson (including a short
description of the purpose for the Advance) the Bank shall lend or make Advances
to PAC from time to time as set forth in this Agreement and all additional
agreements of the parties hereafter made concerning the Deposit Account and the
procedures for obtaining Advances, and all amendments, modifications or
substitutions of any of the foregoing.

Section 2.1.5. Limitation on Borrowings. Notwithstanding anything to
------------------------
the contrary contained herein, the Borrowers shall not at any time allow the
outstanding principal balance advanced under the Consolidated Note to exceed the
Maximum Loan Amount.

-15-
<PAGE>

Section 2.1.6. Repayment of the Line of Credit. The Borrowers shall
-------------------------------
pay accrued interest on the outstanding principal balance of the Line of Credit
on the first day of each month, commencing March 1, 1999. The Borrowers promise
to pay to the order of the Bank all principal, accrued interest, and other costs
and expenses arising under the Line of Credit, this Agreement and all other
Obligations, at Maturity; provided, however, that (a) the outstanding principal
balance of the Line of Credit is subject to mandatory prepayment as further
provided in Section 2.4 hereof, (b) if at any time the principal amount
outstanding under the Line of Credit exceeds the Line of Credit Portion, then
the Borrowers shall immediately pay over a sum equal to the amount by which such
outstanding principal exceeds the Line of Credit Portion, plus accrued interest
to the date of prepayment, and (c) upon the occurrence of an Event of Default,
subject to any applicable grace or cure period, the entire outstanding and
unpaid principal balance of the Line of Credit Loan, together with the accrued
interest thereon to the date of payment, shall be immediately due and payable at
the option of the Bank. Interest shall be payable monthly following preparation
by the Bank of an interest statement showing interest due through the end of the
monthly payment period. If interest for the final days of any period is
estimated, PAC's Deposit Account shall be debited or credited, as the case may
be, to reflect actual interest due through the end of such period. The Bank
shall automatically debit PAC's Deposit Account on the due date of, and in the
amount of, the interest shown to be due on each monthly statement.

Section 2.1.7. Prepayment of the Line of Credit.
--------------------------------

(a) Optional Prepayment. The Borrowers may prepay the
-------------------
Line of Credit in whole or in part at any time and from time to time without
penalty or additional interest. The Line of Credit may be reduced, from time to
time, to a zero balance without affecting the continuing validity of this
Agreement or the continuing security interest and lien of the Bank in and to the
Collateral.

(b) Mandatory Prepayment. The Borrowers shall be
--------------------
required to prepay the Line of Credit and to permanently reduce the Line of
Credit Portion in accordance with the provisions of Section 2.4 hereof

Section 2.2. The Acquisition Line of Credit Loan.
-----------------------------------

Section 2.2.1. The Acquisition Line of Credit Loan. The obligation of
-----------------------------------
the Borrowers to repay the Advances under the Acquisition Line of Credit is
evidenced by the Consolidated Note. Amounts repaid under the Consolidated Note
with respect to the Acquisition Line of Credit may not be reborrowed, and shall
constitute a permanent reduction in the Acquisition Line of Credit. The Bank
will make no further Advances under the Acquisition Line of Credit.

Section 2.2.2. Purpose of the Acquisition Line of Credit. The
-----------------------------------------
Borrowers represent and warrant that the proceeds of Advances under the
Acquisition Line of Credit were used by PAC or designated Borrowers for the
financing of Acquisitions approved by the Bank.

-16-
<PAGE>

Section 2.2.3. Interest Rate. Advances under the Acquisition Line of
-------------
Credit shall bear interest at the LIBOR Rate plus 4.75%. Interest shall be
calculated based upon a year of 360 days and the actual number of days elapsed.
The applicable rate of interest shall be determined as of the first day of each
month. The Acquisition Line of Credit is evidenced by, and shall be repaid with
interest in accordance with, the provisions of the Consolidated Note. The date
and amount of each Advance made by the Bank and each payment made by the
Borrowers shall be recorded by the Bank on the books and records of the Bank,
but any failure to record such dates or amounts shall not relieve the Borrowers
of their obligation of repayment hereunder or under the Consolidated Note.

Section 2.2.4. Line of Credit Fees. (intentionally deleted).
-------------------

Section 2.2.5. Advances under the Line of Credit. (intentionally
---------------------------------
deleted).

Section 2.2.6. Repayment of the Acquisition Line of Credit. The
-------------------------------------------
Borrowers promise to pay to the order of the Bank all principal, accrued
interest, and other costs and expenses arising under the Acquisition Line of
Credit, this Agreement and all other Obligations, at Maturity. Interest on all
outstanding Advances under the Consolidated Note shall be payable on the first
day of each month, commencing March 1, 1999, and the outstanding principal
balance of each Advance under the Acquisition Line of Credit shall be repaid in
consecutive equal monthly principal installments commencing in the month
following the month in which such Advance was made and extending over a term not
to exceed sixty (60) months, as elected by PAC at the time such Advance is
requested; provided, however, that (a) in the absence of any requested repayment
term by PAC, the repayment term shall be sixty (60) months, (b) the outstanding
principal balance of the Acquisition Line of Credit is subject to mandatory
repayment prior to April 25, 1999, as further provided in Section 2.4 hereof,
(c) if at any time the principal amount outstanding under the Acquisition Line
of Credit exceeds the maximum amount permitted under Section 2.2.1 hereof, then
the Borrowers shall immediately pay over a sum equal to the amount by which such
outstanding principal exceeds such amount, plus accrued interest to the date of
prepayment, which shall be applied as a prepayment of the Advance under the
Acquisition Line of Credit most recently extended, (d) all principal, plus
interest and other sums due under the Acquisition Line of Credit shall be
absolutely due and payable at Maturity, and (e) upon the occurrence of an Event
of Default, subject to any applicable grace or cure period, the entire
outstanding and unpaid principal balance of the Acquisition Line of Credit Loan,
together with the accrued interest thereon to the date of payment, shall be
immediately due and payable at the option of the Bank. Interest shall be
payable monthly following preparation by the Bank of an interest statement
showing interest due through the end of the monthly payment period. If interest
for the final days of any period is estimated, PAC's Deposit Account shall be
debited or credited, as the case may be, to reflect actual interest due through
the end of such period. The Bank shall automatically debit PAC's Deposit
Account on the due date of, and in the amount of, the interest shown to be due
on each monthly statement.

-17-
<PAGE>

Section 2.2.7. Prepayment of the Acquisition Line of Credit.
--------------------------------------------

(a) Optional Prepayment. The Borrowers may prepay the
-------------------
Acquisition Line of Credit in whole or in part at any time and from time to time
without penalty or additional interest .

(b) Mandatory Prepayment. The Borrowers shall prepay
--------------------
the Acquisition Line of Credit in accordance with the provisions of Section 2.4
hereof.

Section 2.2.8. Procedure for Permitted Acquisitions. (intentionally
------------------------------------
deleted).

Section 2.2.9. Procedure for Domestic and Foreign Acquisitions.
------------------------------------------------
(intentionally deleted)

Section 2.2.10. Seller Debt. (intentionally deleted)
-----------

Section 2.3. Commitment Fee. (intentionally deleted).
--------------

Section 2.4. Mandatory Repayments and Prepayments.
------------------------------------

(a) The Bank acknowledges that PAC has closed on the
$5,000,000 Subordinated Debt. The Bank acknowledges that PAC has paid
$2,500,000.00 of the loan proceeds to the Bank for application against the
Acquisition Line of Credit. The application of the $2,500,000.00 against the
Acquisition Line of Credit is reflected in the balances set forth in Recital D.
The Bank acknowledges that PAC has paid the remaining $2,500,000.00 of the
$5,000,000.00 loan to the Bank for application against the Line of Credit. The
Bank acknowledges that PAC intends to borrow the $2,500,000 on the Line of
Credit to pay outstanding accounts payable. As a pre-condition to PAC's
borrowing of the $2,500,000 on the Line of Credit, PAC shall provide to the Bank
a schedule showing the disbursement of the $2,500,000 and shall certify to the
Bank that PAC has disbursed the $2,500,000 to account creditors exactly as
reflected on the disbursement schedule.

(b) On or before February 25, 1999, the Borrowers
shall close on the Heartland Bank Financing. From the Net Mortgage Loan Proceeds
of that financing, the Borrowers shall pay at closing to the Bank a minimum of
$1,000,000.00, which the Bank shall apply against the Line of Credit. This
$1,000,000.00 payment shall permanently reduce the Line of Credit. The Borrowers
shall pay to the Bank any Net Mortgage Loan Proceeds of the Heartland Bank
Financing above $1,000,000.00 for application against the Line of Credit, and
any such application shall permanently reduce the Line of Credit.

(c) On or before February 25, 1999, the Borrowers
shall close on the Mansfield Sale Transaction. The Borrowers shall pay at
closing to the Bank all Net Sale Proceeds of the Mansfield Sale Transaction,
which the Bank shall apply against the Line of Credit. All but $350,000 of the
Net Sale Proceeds (but no less than $1,000,000.00) shall

-18-
<PAGE>

permanently reduce the Line of Credit. The Borrowers may borrow the amount of
the Net Sale Proceeds less $1,000,000, but not more than $350,000.00, to pay
accounts payable, but only on condition that PAC provide to the Bank a schedule
showing the proposed disbursement to account creditors, and that PAC certify to
the Bank that it has made the disbursement to account creditors exactly as
reflected on the disbursement schedule.

(d) On or before March 25, 1999, the Borrowers shall close on the
Cleveland Sale Transaction. The Borrowers shall pay at closing to the Bank all
Net Sale Proceeds of the Cleveland Sale Transaction, which the Bank shall apply
against the Line of Credit. All but $300,000.00 of the Net Sale Proceeds (but
no less than $2,500,000) shall permanently reduce the Line of Credit. The
Borrowers may borrow the amount of the Net Sale Proceeds less $2,500,000, but
not more than $300,000.00, to pay accounts payable, but only on condition that
PAC provide to the Bank a schedule showing the proposed disbursement to account
creditors, and that PAC certify to the Bank that it has made the disbursement to
account creditors exactly as reflected on the disbursement schedule.

(e) On or before March 25, 1999, the Borrowers shall close on the
Columbus Sale Transaction. The Borrowers shall pay at closing to the Bank all
Net Sale Proceeds of the Columbus Sale Transaction, which the Bank shall apply
against the Line of Credit. All but $100,000.00 of the Net Sale Proceeds (but
no less than $1,500,000) shall permanently reduce the Line of Credit. The
Borrowers may borrow the amount of the Net Sale Proceeds less $1,500,000, but
not more than $100,000.00, to pay accounts payable, but only on condition that
PAC provide to the Bank a schedule showing the proposed disbursement to account
creditors, and that PAC certify to the Bank that it has made the disbursement to
account creditors exactly as reflected on the disbursement schedule.

(f) On or before April 25, 1999, the Borrowers shall generate
$7,500,000.00 in Net Mortgage Proceeds from FFCA Financing of the Borrowers'
real property listed in Exhibit No. 5. Contemporaneously with closing, the
-------------
Borrowers shall pay $5,000,000.00 of these Net Mortgage Loan Proceeds to the
Bank, which the Bank shall apply against whichever term loans under the
Acquisition Line of Credit the Bank chooses. Provided that the Borrowers have
made all required payments to the Bank in a timely manner, and are not otherwise
in default under this Agreement, the Borrowers may use the remaining
$2,500,000.00 in Net Mortgage Proceeds to satisfy in part the $5,000,000
Subordinated Debt.

(g) By April 25, 1999, the Borrowers shall have permanently reduced
the Line of Credit to an amount equal to $4,000,000.00 or less.

ARTICLE III
-----------
SECURITY FOR THE LOANS
----------------------

The repayment of the Loans, the satisfaction of the Obligations, and
the full, complete and absolute performance by the Borrower of each of the terms
and conditions of this

-19-
<PAGE>

Agreement, the Consolidated Note, the other Loan Documents and all other
Obligations, direct or indirect, owing to the Bank shall be secured by the
following:

Section 3.1. Grant of Security Interest. PAC and each other Borrower
--------------------------
hereby jointly and severally assign to the Bank all of the Borrowers' right,
title, and interest in and to, and confirm and grant to the Bank a continuing
first priority lien and security interest (subject only to any Permitted Lien)
in and to, the following tangible and intangible assets owned by the Borrowers,
wherever located, whether now owned or hereafter acquired by the Borrowers,
together with all substitutions therefor, and replacements and renewals thereof:

(a) Accounts (including all Receivables);
(b) Inventory;
(c) Chattel Paper;
(d) Documents;
(e) General Intangibles (including trademarks, trade names,
patents, copyrights and the goodwill associated
therewith, and all rights to payments due from
franchisees of whatever nature);

(f) Instruments;
(g) Equipment;
(h) Securities (including the capital stock of all
Subsidiaries); and
(i) All Records relating to or pertaining to any of the
above.

In addition to the previously described kinds and types of property of the
Borrowers, the Borrowers hereby assign, transfer and set over to the Bank all of
the Borrowers' right, title and interest in and to, and confirm and grant to the
Bank a continuing security interest in, all amounts that may be owing at any
time and from time to time by the Bank to the Borrowers in any capacity,
including, but not limited to, any balance or share belonging to any Borrower of
any deposit or other account with the Bank, which security interest shall be
independent of and in addition to any right of set-off which the Bank may
possess.

Section 3.2. Proceeds and Products. The Bank's security interest
---------------------
provided for herein shall apply to all cash and non-cash proceeds, including but
not limited to insurance proceeds, and the products of the Collateral.

Section 3.3. Priority of Security Interests. The security interests
------------------------------
granted by the Borrowers to the Bank pursuant to this Agreement and at the time
of any Advance hereunder shall be a first priority lien security interest in the
Collateral subject to no other security interest or lien except Permitted Liens.
The Collateral shall secure the payment and performance of all Obligations
hereunder.

Section 3.4. Real Estate. The Bank reserves the right to secure the
-----------
Loans and Obligations by deeds of trust or mortgages on any real estate, or
interests in real estate, now or hereafter owned by PAC or the Borrowers,
subject to any Permitted Liens. Exhibit No. 6 to this
-------------

-20-
<PAGE>

Agreement sets forth a complete list of all real property owned by each
Borrower, and the amount of any debt secured by the real property.

Section 3.5. Future Advances. The security interests granted by the
---------------
Borrowers shall secure all current and all future Advances made by the Bank to
the extent such current and future Advances constitute Loans or Obligations, and
the Bank may advance or readvance upon repayment by the Borrowers of all or any
portion of the sums loaned to the Borrowers and any such Advance or readvance
shall be fully secured by the security interests created by this Agreement.

Section 3.6. Trademark Assignments. The Borrowers hereby confirm,
---------------------
assign and grant a security interest and lien upon all federally registered
trademarks, trade names, service marks, copyrights, and patents now or hereafter
existing, and applications therefor, including specifically, without limitation,
the trademarks identified in the Trademark Assignments.

Section 3.7. Landlord's Waivers. At the request of the Bank, at any
------------------
time and from time to time, PAC and/or any Borrower requested by the Bank shall
provide to the Bank appropriate landlords' waivers, in form and content
satisfactory to the Bank, for the location of PAC's or any other Borrower's
chief executive office where its or their original entry books of account are
maintained, and such other locations as may be determined from time to time by
the Bank, which landlords' waivers shall acknowledge the Bank's first priority
lien security interest in the Collateral and shall contain an express
subordination of any rights which the landlord might attempt to assert against
such Collateral to the rights of the Bank.

ARTICLE IV
----------
CONDITIONS PRECEDENT
--------------------

The Bank's obligation to make Advances under the Line of Credit is
specifically subject to the full satisfaction of the conditions precedent set
forth in this Article IV as follows:

Section 4.1. Required Documents and Payments. The Borrowers shall
--------------------------------
deliver to the Bank at execution of this Agreement the following:

(a) A certified copy of resolutions of each Borrower
(i) authorizing the execution, delivery and performance of this Agreement and
all other documents to be executed in connection with this Agreement; and (ii)
stating the incumbency and containing the signatures of the officers of each
Borrower executing this Agreement and all other documents to be executed in
connection with this Agreement;

(b) A duly executed Third Consolidated, Amended and
Restated Revolving and Acquisition Line of Credit Promissory Note;

-21-
<PAGE>

(c) An opinion of Borrowers' counsel to and for the
benefit of the Bank as to the due execution, enforceability and validity of this
Agreement and all documents to be executed in connection with this Agreement, in
form satisfactory to the Bank and its counsel;

(d) Such other items as the Bank may reasonably
require; and

(e) Payment for all attorneys' fees and expenses
incurred by the Bank in connection with the Loan and unreimbursed by the
Borrowers to the Bank.

Section 4.2. Combination and Initial Public Offering. (intentionally
---------------------------------------
deleted).

Section 4.3. Satisfaction of Terms. At the time of each Advance, or
---------------------
any readvance or other credit extended hereunder, the Borrowers shall have
complied with all of the terms and conditions hereof, all representations and
warranties shall be true and accurate in all material respects as of such date
(other than changes occurring in the ordinary course of business and not in
violation of this Agreement), and no Event of Default shall have occurred and be
continuing.

Section 4.4. Closing. (intentionally deleted).
-------

ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------

To induce the Bank to make the Loans and enter into this Agreement,
PAC represents and warrants as to the business and affairs of itself and, to its
knowledge, all Subsidiaries, and each Subsidiary represents and warrants as to
its business and affairs, and all Borrowers acknowledge the Bank's justifiable
reliance upon the accuracy of the matters set forth below as of the date hereof
and at the time of each Advance under the Line of Credit:

Section 5.1. Accuracy and Completeness of Information. All
----------------------------------------
information, documents, reports, statements, financial statements, and data
submitted by or on behalf of the Borrower in connection with the Loan, or in
support thereof, are true, accurate, and complete in all material respects and
contain no knowingly false, incomplete or misleading statements or omit any
material information.

Section 5.2. Non-Existence of Defaults, Etc. Except to the extent
-------------------------------
disclosed to the Bank by the Borrower, the Borrower is not in material default
with respect to any of its existing indebtedness, and the making and performance
of this Agreement and the Loan Documents will not immediately, or with the
passage of time, the giving of notice, or both: (a) violate the provisions of
any Governing Document of the Borrower, violate any Laws which would impair the
Collateral or the Bank's lien and security interest therein or result in a
material default under any material contract, agreement, or instrument to which
the Borrower is a party or by which the Borrower or its property is bound; or
(b) result in the creation or imposition of any

-22-
<PAGE>

security interest in, or lien or encumbrance upon, any of the assets of the
Borrower, except in favor of the Bank or the holders of Permitted Liens.

Section 5.3. Litigation. Except to the extent disclosed in Exhibit
---------- -------
No. 7 attached hereto, as of the date of execution of this Amended and Restated
- -----
Loan and Security Agreement, there is no action, suit, investigation, or
proceeding pending or, to the best knowledge and belief of the Borrower,
threatened against the Borrower, which if adversely determined could reasonably
be expected to have a Material Adverse Effect on the Borrower.

Section 5.4. Liabilities or Adverse Changes. The Borrower has no
------------------------------
direct or contingent material liability or indebtedness, other than such
indebtedness as is secured by a Permitted Lien, which is known to the Borrower
and not previously disclosed to the Bank, nor does the Borrower know of or
expect any Material Adverse Change in the assets, liabilities, properties,
business, or condition, financial or otherwise, of the Borrower, except as
disbursed by the Borrower to the Bank.

Section 5.5. Title to Collateral. The Borrower has good and
-------------------
marketable title to all of the existing Collateral and will have good and
marketable title to all of the Collateral hereafter acquired, subject only to
Permitted Liens.

Section 5.6. First Priority Liens. Upon the proper filing of all
--------------------
financing statements, the Trademark Assignments and other recordings
contemplated herein in the jurisdictions and locations identified by the
Borrower to the Bank, or, in the case of the Pledge Agreement, the possession by
the Bank of certificates evidencing the Pledged Securities, the Loan Documents
are and will be effective to create in favor of the Bank a valid and enforceable
first priority perfected security interest in and lien upon all right, title and
interest of PAC and its Subsidiaries in the Collateral described therein,
subject only to Permitted Liens.

Section 5.7. Use of Loan Proceeds. The Borrower shall use Advances
--------------------
only for the purposes represented to the Bank and as set forth in this
Agreement.

Section 5.8. Status. The Borrower is a corporation or a limited
------
liability company, as the case may be, validly organized and existing under the
Laws of the state of its incorporation or organization and its operations and
affairs have been effectively and validly commenced. The Borrower has qualified
to do business as a foreign corporation or limited liability company, as the
case may be, in all states where the ownership of its properties or conduct of
its business requires qualification. The Borrower has the power to own its
properties, conduct its business and affairs, and enter into the Loan and
perform the Obligations. The Borrower's entry into the Loan with the Bank has
been validly and effectively approved by its Board of Directors, shareholders,
members or as may be required by its Governing Documents or applicable Law. All
copies of the Governing Documents and corporate resolutions of the Borrower
shown to the Bank are true, accurate, and complete and no action has been taken
in derogation or abrogation thereof. The Borrower has not changed its name,
been the surviving corporation in a merger, acquired any business, or conducted
business under any trade name, except as referenced in Exhibit No. 8 attached
-------------
hereto and incorporated herein by this reference.

-23-
<PAGE>

No Borrower has changed the county and state in which its chief executive office
is located within the last five (5) years.

Section 5.9. Financial Statements.
--------------------

(a) All financial statements (as amended through the date of this
Agreement) submitted by the Borrowers to the Bank have been prepared in
accordance with GAAP (subject, with respect to the unaudited financial
statements, to the absence of notes required by GAAP and to normal year-end
audit adjustments) and present fairly the financial position of the Borrowers
for the periods then ended. Neither PAC nor any of its Subsidiaries has directly
or indirectly declared, ordered, paid, made or set apart any amounts or property
for any dividend, share acquisition or other distribution, or agreed to do so.

(b) (intentionally deleted)

Section 5.10. Solvency. (intentionally deleted)
--------

Section 5.11. Validity, Binding Nature, and Enforceability of
-----------------------------------------------
the Loan Documents. The Loan Documents executed by the Borrower are the valid
- ------------------
and binding obligations of the Borrower, fully enforceable against the Borrower
in accordance with their terms.

Section 5.12. Defaults Under Loan Documents. (intentionally
-----------------------------
deleted).

Section 5.13. Taxes. The Borrower has: (a) filed all federal, state
-----
and local tax returns and other reports which are required by Law to be filed
prior to the date hereof, (b) paid or caused to be paid all taxes, assessments
and other governmental charges that are due and payable prior to the date
hereof, except where the same are being contested in good faith by appropriate
proceedings with adequate reserves therefor having been set aside; and (c) made
adequate provision for the payment of such taxes, assessments or other charges
accruing but not yet payable. The Borrower has no knowledge of any deficiency
or additional assessment in a materially important amount in connection with any
taxes, assessments or charges not provided for on the Borrower's books of
account or reflected in the Borrower's financial statements, nor is the Borrower
under audit by any federal, state or local tax authority in connection with any
material tax obligations.

Section 5.14. ERISA.
-----

(a) Exhibit No. 9 lists all employee benefit plans within the meaning
-------------
of Section 3(3) of ERISA maintained or sponsored by PAC or, to the knowledge of
PAC, any of its Subsidiaries or to which PAC or, to the knowledge of PAC, any of
its Subsidiaries is obligated to contribute (the "Plans") and separately
identifies all Qualified Plans (as defined below) and all multi-employer plans
within the meaning of Section 3(37) of ERISA with respect to which PAC or, to
the knowledge of PAC, any of its Subsidiaries is a participating employer

-24-
<PAGE>

("Multi-employer Plan"). PAC will at the request of the Bank deliver true and
correct copies of all such Plans to the Bank.

(b) To the best knowledge of PAC, each such Plan is in compliance in
all material respects with the applicable provisions of ERISA, the Internal
Revenue Code and other federal or state law, including, to the knowledge of PAC,
all requirements under the Internal Revenue Code or ERISA for filing reports
(which are true and correct in all material respects as of the date filed).

(c) The form of each Plan intended to be qualified under Section
401(a) of the Internal Revenue Code ("Qualified Plan") to the knowledge of PAC
qualifies under Section 401(a) of the Internal Revenue Code, and the trusts
created thereunder are, to the knowledge of PAC, exempt from tax under the
provisions of Section 501(a) of the Internal Revenue Code, and to the knowledge
of PAC nothing has occurred that would cause the loss of such qualification or
tax-exempt status.

(d) There is no outstanding liability under Title IV of ERISA with
respect to any Plan maintained or sponsored by PAC or, to the knowledge of PAC,
its Subsidiaries (as to which PAC or any of its Subsidiaries is or may be
liable), nor with respect to any Plan to which PAC or, to the knowledge of PAC,
any of its Subsidiaries (wherein PAC or any of its Subsidiaries is or may be
liable) contributes or is obligated to contribute which would have a Material
Adverse Effect.

(e) To the knowledge of PAC, none of the Qualified Plans subject to
Title IV of ERISA has any unfunded benefit liability as defined in Section
4001(a)(18) of ERISA (as to which PAC or any of its Subsidiaries is or may be
liable) which would have a Material Adverse Effect.

(f) PAC and, to the knowledge of PAC, its Subsidiaries have complied
in all material respects with the applicable notice and continuation of coverage
requirements of Section 4980B of the Internal Revenue Code.

(g) No event has occurred or is reasonably expected to occur with
respect to any Plan maintained or sponsored by PAC or any of its Subsidiaries or
to which PAC or any of its Subsidiaries is obligated to contribute which would
constitute a "reportable event" within the meaning of Section 4043(c) of ERISA
(excluding a reportable event for which the notice requirement has been waived
by the PBGC) otherwise affect the tax qualification of any Qualified Plans, or
result in a deficiency in any required contributions which would have a Material
Adverse Effect.

(h) As of the date of execution of this Amended and Restated Loan and
Security Agreement, there are no pending or, to the knowledge of PAC, threatened
claims, actions or lawsuits, other than routine claims for benefits in the usual
and ordinary course, asserted or instituted against (i) any Plan maintained or
sponsored by PAC and, to the knowledge of PAC, its Subsidiaries or their assets,
or (ii) any fiduciary with respect to any Plan for which

-25-
<PAGE>

PAC or, to the knowledge of PAC, any of its Subsidiaries may be directly or
indirectly liable, through indemnification obligations or otherwise which would
have a Material Adverse Effect.

(i) Neither PAC nor, to the knowledge of PAC, any of its Subsidiaries
has incurred or, to the knowledge of PAC, reasonably expects to incur (i) any
liability (and no event has occurred that, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multi-employer Plan or (ii) any liability under
Title IV of ERISA (other than premiums due and not delinquent under Section 4007
of ERISA) with respect to a Plan which would have a Material Adverse Effect.

(j) Neither PAC nor, to the knowledge of PAC, any of its Subsidiaries
has engaged, directly or indirectly, in a nonexempt prohibited transaction (as
defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA) in
connection with any Plan that has a Material Adverse Effect.

Section 5.15. Assets for Conduct of Business. PAC and each of its
------------------------------
Subsidiaries possess adequate assets, licenses, patents, copyrights, trademarks
and trade names necessary to continue to conduct its business substantially as
heretofore conducted without any material conflict with the rights of other
Persons.

Section 5.16. Trademarks. Exhibit No. 10 sets forth a true and
---------- --------------
complete list of all registered patents, trademarks, trade names and copyrights
owned by the Borrower, or for which applications are pending (the "Intellectual
Property"). Each of the federal registrations pertaining to the Intellectual
Property owned by the Borrower is valid and in full force and effect, and all
required filings in connection with such registrations have been properly made
and all required fees have been paid. The Borrower owns, or has the right to
use pursuant to valid and effective agreements, all Intellectual Property and no
claims are pending against the Borrower by any person with respect to the use of
any Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement relating to the same, and the current
use by the Borrower of the Intellectual Property does not infringe on the rights
of any third party.

Section 5.17. Compliance with Laws. Except as otherwise disclosed to
--------------------
the Bank, Borrower has complied in all material respects with all applicable
Laws with respect to: (a) any restrictions, specifications, or other
requirements pertaining to products that the Borrower sells or to the services
it performs; (b) the conduct of its business; and (c) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business. The Borrower has complied, and shall continue to
comply with, all laws, ordinances, rules, regulations, guidelines, orders and
decrees in regard to safety and the disposal of toxic wastes and hazardous
materials.

Section 5.18. Accuracy of Representations and Warranties. No
------------------------------------------
certificate or other document furnished by the Borrower pursuant hereto contains
any untrue statement of material fact or omits to state a material fact
necessary to make such representation or warranty not misleading in light of the
circumstances under which it was made.

-26-
<PAGE>

Section 5.19. Consents, Approvals, and Authorizations. Each consent,
---------------------------------------
approval or authorization of, or filing, registration or qualification with, any
Person which is required to be obtained or effected by the Borrower in
connection with the execution and delivery of this Agreement and the Loan
Documents, or the undertaking or performance of any obligation hereunder or
thereunder, has been duly obtained or effected.

Section 5.20. Title to Assets Other Than Collateral. The Borrower
-------------------------------------
has good and marketable title to all of its material assets, subject to no
security interest, encumbrance, lien, or claim of any Person other than the
Bank, holders of Permitted Liens and lessors under true operating leases.

Section 5.21. Margin Securities. Neither PAC nor any of its
-----------------
Subsidiaries owns any "margin stock" within the meaning of Regulation U. None of
the proceeds of the Loans will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin stock, maintaining, reducing or retiring
any indebtedness that was originally incurred to purchase or carry margin stock
or for any other purpose that would violate Regulation G, Regulation U,
Regulation T or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System, as the same may be in effect from time to time.

Section 5.22. Place of Business. The Borrowers' respective chief
-----------------
executive offices, principal places of business, and only places of business
where their respective original entry Records are kept, are located at the
addresses set forth in Exhibit No. 8 attached hereto.
-------------

Section 5.23. Additional Business Locations. The Borrower maintains
-----------------------------
other business locations as set forth in Exhibit No. 8 attached hereto where
-------------
Collateral is stored.

Section 5.24. Other Subsidiaries. As used herein, the term
------------------
"Subsidiaries" means those companies (other than PAC) which have executed this
Agreement and assumed the joint and several Obligations hereunder and under the
Consolidated Note, and which are, directly or indirectly, owned and controlled
by PAC, whether directly or through an intermediary which is a Subsidiary. The
term "Subsidiaries" may also include additional parties who subsequently execute
Assumption Agreements and become parties to this Agreement and joint and several
obligors under the Consolidated Note. PAC may now or hereafter own and/or
control other business entities, and may in the future create, form or acquire
other such subsidiaries which are not now, and will not in the future be, a
"Borrower" as such term is defined and used herein and in the Consolidated Note.
PAC shall notify the Bank, in writing, of any such nonborrowing Affiliate
hereafter created, formed or acquired. PAC and all other Borrowers now or
hereafter existing represent and covenant that none of the nonborrowing
Affiliates shall receive any direct benefit from the Loans.

Section 5.25. Material Contracts and Commitments. Except as
----------------------------------
previously disclosed in writing to the Bank: (a) the Borrower is not in material
default under any binding Material Contract of any kind; and (b) to the best of
Borrower's knowledge, all parties to any Material Contract binding upon the
Borrower have complied in all material respects with the

-27-
<PAGE>

provisions of such Material Contract. As used in this Section 5.25, the term
"Material Contract" shall mean any contract or commitment for consideration in
excess of Two Hundred Fifty Thousand Dollars ($250,000).

Section 5.26. Environmental Matters.
---------------------

(a) Except as disclosed in the Phase I Environmental Surveys for each
of the Borrower-owned real properties, copies of which were delivered to the
Bank, (i) no Hazardous Substances are unlawfully stored or otherwise unlawfully
located on the business premises of PAC or its Subsidiaries, and neither PAC nor
any of its Subsidiaries has contaminated, nor to the Subsidiaries' knowledge has
any other Person contaminated, any part of the business premises of PAC or its
Subsidiaries, including the groundwater located thereon and thereunder, with any
Hazardous Substance during the ownership, occupancy or operation thereof by PAC
or any of its Subsidiaries; (ii) there have been no releases of Hazardous
Substances in violation of any environmental Law by PAC or any of its
Subsidiaries, or to its Subsidiaries' knowledge by any other Person, on any real
estate previously owned by the Subsidiaries; (iii) to the Subsidiaries'
knowledge, there are no underground storage tanks situated on the business
premises of PAC or its Subsidiaries; and (iv) to the knowledge of the
Subsidiaries, neither PAC nor any of its Subsidiaries has ever sent Hazardous
Substances to a site which, pursuant to any environmental Law, (1) has been
placed on the "National Priorities List" or "CERCLIS List" of hazardous waste
sites (or any similar state list), or (2) which is subject to a claim, an
administrative order or other request to take "removal" or "remedial" action (as
defined under environmental Laws) or to pay for the costs of cleaning up such a
site; and

(b) All activities and operations of PAC and each of its Subsidiaries
comply in all material respects with the requirements of all applicable
environmental Laws of all governmental authorities having jurisdiction over PAC
or any of its Subsidiaries or its properties, and neither PAC nor any of its
Subsidiaries is involved in any suit or proceeding or has received any written
notice from any governmental agency alleging that PAC or any of its Subsidiaries
is a responsible party with respect to a release of Hazardous Substances or has
received written notice of any claims from any person or entity relating to
property damages or personal injuries from exposure to Hazardous Substances.

(c) As used herein, "Hazardous Substance" means any substances or
materials (i) that are or become defined as hazardous wastes, hazardous
substances, pollutants, contaminants or toxic substances under any environmental
Law; (ii) that are toxic, explosive, corrosive, flammable, infectious,
radioactive, mutagenic or otherwise hazardous and are or become regulated by any
governmental authority; (iii) the presence of which requires investigation or
remediation under any environmental Law or common law; or (iv) that contain,
without limitation, asbestos, polychlorinated biphenyls, urea formaldehyde foam
insulation, petroleum hydrocarbons, petroleum derived substances or waste, crude
oil, nuclear fuel, natural gas or synthetic gas.

Section 5.27. Grimaud Lien. PAC will perform all obligations which
------------
are secured by the Grimaud Lien in a timely manner, including specifically,
without limitation, the

-28-
<PAGE>

payment of all subfranchisor fees within ten (10) days of receipt, and in no
event shall any payments owing Grimaud and secured by the Grimaud Lien exceed in
the aggregate at any one time the sum of $100,000. PAC shall notify the Bank in
writing of any material disputes, or possible disputes, promptly upon having
actual knowledge of a material dispute, or the possibility thereof. PAC shall
use its best efforts in the ordinary conduct of its business to (a) avoid any
enforcement action of the Grimaud Lien, and (b) terminate the Grimaud Lien.

Section 5.28. Year 2000. The Borrower is taking action to ensure
---------
that all of the material computer software, computer firmware, computer hardware
(whether general or special purpose) and other similar or related items of
automated, computerized and/or software systems(s) that are used or relied on by
Borrower or any Subsidiary in the conduct of its business will not malfunction,
will not cease to function, will not generate incorrect data, and will not
produce incorrect results when processing, providing and/or receiving (i) date-
related data into and between the twentieth and twenty-first centuries, and (ii)
date-related data in connection with any valid date in the twentieth and twenty-
first centuries.

As used above in this Article V, the singular "Borrower" shall mean each
Borrower (except PAC) for itself, and PAC for and on behalf of itself and all
other Borrowers (except representations of PAC on behalf of its Subsidiaries
shall be to PAC's' knowledge).

ARTICLE VI
----------
AFFIRMATIVE COVENANTS
---------------------

PAC for itself and all other Borrowers, and each Subsidiary for
itself, covenants and agrees, during the term of this Agreement and while any
Obligations are outstanding and unpaid, to do and perform the following:

Section 6.1. Payments. All Obligations shall be paid in full when
--------
and as due, time being of the essence.

Section 6.2. Performance. Except in any instance where a cure period
-----------
is applicable or otherwise provided by the Bank, all Obligations shall be fully
and completely performed, when and as required, time being of the essence.

Section 6.3. Protection of Security. The value of the Collateral
----------------------
shall at all times be protected and preserved.

Section 6.4. Insurance. The Borrower shall obtain and maintain the
---------
following insurance coverages:

Section 6.4.1. Casualty Insurance. The Borrower shall obtain and
------------------
maintain during the term of the Loan for all of its assets and properties, both
real, personal, and mixed, including but not limited to the Collateral, fire and
extended coverage casualty insurance. Such insurance shall be written in
amounts satisfactory to the Bank and sufficient to prevent any co-

-29-
<PAGE>

insurance liability (which amount shall be the full insurable value). The Bank
shall be supplied with a certificate of insurance and/or duplicate originals or
copies of the aforementioned insurance policies and paid receipts evidencing
payment of the premiums due on the same. The aforementioned policies shall be
endorsed so as to make them noncancellable unless thirty (30) days prior notice
of cancellation is provided to the Bank. The Borrower shall give the Bank prompt
notice of any material loss covered by such casualty insurance.

Section 6.4.2. Liability and Worker's Compensation Insurance. The
----------------------------------------------
Borrower shall obtain and maintain during the term of the Loan public liability
and property damage insurance in such amounts, with insurance companies, and
upon policy forms reasonably acceptable to and approved by the Bank. The
Borrower shall obtain and maintain during the term of the Loan workers'
compensation insurance, in such amounts, with insurance companies, and in forms
reasonably acceptable to and approved by the Bank. The Borrower, on request,
shall supply the Bank with copies of the liability and worker's compensation
insurance policies and receipts evidencing the payment of premiums due thereon
or, alternatively, certificates from the insurance companies certifying to the
existence of policies, summarizing the terms of the policies, and indicating the
payment of premiums due thereon.

Section 6.4.3. Other Insurance. The Borrower shall also maintain
---------------
such other forms of insurance as may be customary or prudent for businesses of
the type carried on by each Borrower or as may be required by the Bank from time
to time as determined in its reasonable discretion.

Section 6.5. Collection of Accounts. The Borrower shall collect its
----------------------
Accounts only in the ordinary course of business unless written permission to
the contrary is obtained from the Bank.

Section 6.6. Maintenance of Existence. The Borrower shall take all
------------------------
necessary actions to preserve its existence, franchises and good standing in its
state of incorporation or organization and in any other state where
qualification as a foreign corporation or organization is required, and shall
comply with all present and future Laws applicable in the operation and conduct
of business, and all material agreements to which it is subject.

Section 6.7. Notice of Litigation and Proceedings. The Borrower
-------------------------------------
shall give (a) notice to the Bank within fifteen (15) calendar days of any
litigation or proceeding in which it is a party if an adverse decision (i) would
require it to pay more than Two Hundred Thousand Dollars ($200,000) or deliver
assets the value of which equals or exceeds such sum (whether or not the claim
is considered to be covered by insurance), or (ii) could, when aggregated with
all other litigation in which any Borrower is a party, cause any one or more
Borrowers to pay more than Five Hundred Thousand Dollars ($500,000) if an
adverse decision were rendered; and (b) immediate notice to the Bank of the
institution of any other suit or proceeding which might have a Material Adverse
Effect on the Collateral, the Borrower's operations, financial condition,
property or business.

-30-
<PAGE>

Section 6.8. Payment of Indebtedness to Third Persons. The Borrower
----------------------------------------
shall pay when and as due, or within applicable grace periods, all material
indebtedness due third Persons, except when the amount thereof is being
contested in good faith by appropriate proceedings and with adequate reserves
therefor being set aside by the Borrower.

Section 6.9. Notice of Change of Business Location. The Borrower
-------------------------------------
shall notify the Bank thirty (30) days in advance of: (a) any change in the
location of its existing offices or places of business; (b) the establishment of
any new, or the discontinuance of any existing, place of business; and (c) any
change in or addition to the location of the place where Records are kept.

Section 6.10. Pension Plans. The Borrower shall: (a) fund all of its
-------------
defined benefit plans within the meaning of Section 3(35) of ERISA in accordance
with, and in amounts not less than required by, the minimum funding standards of
Section 302 of ERISA; (b) furnish the Bank promptly, upon request, with copies
of all reports or other statements filed with the United States Department of
Labor or the Internal Revenue Service with respect to any employee benefit plans
governed by ERISA; and (c) promptly advise the Bank of the occurrence of any
"reportable event" within the meaning of Section 4043(c) of ERISA (excluding a
reportable event for which the notice requirement has been waived by the Pension
Benefit Guaranty Corporation) or a non-exempt "prohibited transaction" within
the meaning of Section 406 of ERISA and Section 4975 of the Internal Revenue
Code with respect to any employee benefit plans governed by ERISA.

Section 6.11. Maintenance of Assets and Properties. The Borrower
------------------------------------
shall maintain its material assets and property, real, personal, and mixed, in
good condition and repair, normal wear and tear excepted, and shall pay and
discharge or cause to be paid and discharged when due, the cost of repairs to or
maintenance of the same, and shall pay or cause to be paid all rental or
mortgage payments due on any real estate used or owned by the Borrower.

Section 6.12. Payment of Taxes. The Borrower shall pay or cause to
----------------
be paid when and as due, without interest or penalty, all taxes, assessments and
charges or levies imposed upon it or on any of its property or which it is
required to withhold and pay over to any taxing authority or which it must pay
on its income, except where contested in good faith by appropriate proceedings
with adequate reserves therefor having been set aside by it. The Borrower shall
pay or cause to be paid all such taxes, assessments, charges or levies forthwith
whenever foreclosure on any lien that attaches appears imminent (or provide
security therefor).

Section 6.13. Further Assurances and Power of Attorney. The Borrower
----------------------------------------
agrees to execute such other and further documents, including, without
limitation, promissory notes, security agreements, agreements, financing
statements, continuation statements, and the like as may from time to time in
the reasonable opinion of the Bank be deemed necessary, proper, or convenient,
to perfect, confirm, establish, reestablish, continue, or complete the security
interest in the Collateral and the purposes and intentions of this Agreement as
provided herein, it being the intention of the Borrower to hereby provide a full
and absolute warranty of further assurance to the Bank. Upon the written
request of the Bank that the Borrower execute any such document and the failure
of the Borrower to so execute

-31-
<PAGE>

any such document within ten (10) days, or at any time and from time to time
upon the occurrence and during the continuance of any Event of Default, as the
case may be, the Borrower hereby irrevocably and automatically appoints the Bank
as the Borrower's attorney-in-fact to execute any such document in the
Borrower's name and on the Borrower's behalf and such power of attorney shall
constitute a power of attorney coupled with an interest and be irrevocable.

Section 6.14. Advancements. If the Borrower should fail to perform
------------
any of the affirmative covenants contained in this Article within any grace or
cure period as herein provided, or if the Borrower should fail to protect or
preserve the Collateral or the status and priority of the security interest of
the Bank in the Collateral, the Bank may make Advances to perform the same on
behalf of the Borrower. The Bank shall endeavor to give notice prior to
advancements; provided that failure to give notice shall not affect Borrower's
liability therefor. All sums so advanced shall be deemed to be an Advance made
pursuant to the Line of Credit and immediately upon advancement become secured
by the security interests created by this Agreement and the terms and provisions
of this Agreement and all of the applicable Loan Documents, and shall become
part of the principal amount owed to the Bank with interest to be assessed at
the applicable rate thereon. The Borrower shall repay on demand all sums so
advanced on the Borrower's behalf, plus any reasonable expenses or costs
incurred by the Bank, including actual and reasonable attorney's fees, with
interest thereon at the highest rate provided for in the applicable Loan
Documents from the date of advancement. The provisions of this Section shall
not be construed to prevent the institution of the rights and remedies of the
Bank upon the occurrence of an Event of Default by the Borrower. The contrary
notwithstanding, the authorization contained in this Section shall impose no
duty or obligation on the Bank to perform any action or make any Advance on
behalf of the Borrower and is for the sole benefit and protection of the Bank.

Section 6.15. Maintain Records and Make Available to Bank
-------------------------------------------
for Inspection. The Borrower shall maintain Records pertaining to the
- --------------
Collateral and the conduct and operation of its business, in such detail, form
and scope as the Bank shall from time to time require. During normal business
hours, the Bank and its duly authorized representatives shall have full access
to, and the right to audit, check, inspect and make abstracts and copies from,
such Records. The Bank or the Bank's agents may enter upon any of the
Borrower's premises from time to time during normal business hours for the
purpose of inspecting the Collateral and any and all such Records. The Bank may
send verifications of Receivables to Account Debtors and may confer and
correspond with other creditors of the Borrower. Upon the occurrence and during
the continuation of an Event of Default, the Bank may enter the business
premises and take possession of and remove any or all such Records, or copies
thereof, provided, however, such Records or copies shall be at all times
available to the Borrower. All audits, examinations and inspections shall be
performed at the Borrower's expense.

Section 6.16. Financial Statements. PAC and the other Borrowers
--------------------
shall furnish the Bank:

(a) (intentionally deleted).

-32-
<PAGE>

(b) (intentionally deleted).

(c) As soon as practicable and in any event within thirty (30) days
after the end of each calendar month, a combined statement of income and
retained earnings of the Borrowers for such period and for the period from the
beginning of the current fiscal year of PAC to the end of each period, all in
detail and scope satisfactory to the Bank, prepared in accordance with GAAP
consistently applied, certified as true and complete by the chief financial
officer of PAC and accompanied by a certificate of that officer demonstrating
compliance with each of the covenants contained in Sections 6.17, 6.18, and
6.19, as applicable with respect to covenants tested on a quarterly basis.

(d) As soon as practicable and in any event within thirty (30) days
after the close of each fiscal year of PAC, beginning with the current fiscal
year, an annual operating budget and capital budget prepared on a quarterly
basis for PAC and its Subsidiaries on a consolidated basis, in form and detail
reasonably acceptable to the Bank;

(e) Promptly upon receipt thereof, copies of any management letters or
other reports submitted to PAC or its Subsidiaries by its independent certified
public accountants in connection with its examination of or preparation of
financial statements for PAC or its Subsidiaries.

(f) Copies of all Forms 10Q and 10K reports filed with the Securities
and Exchange Commission within ten (10) days after the filing thereof, together
with a Compliance Certificate of the chief executive officer or chief financial
officer of PAC stating whether any Event of Default (or any event which, with
the giving of notice or passage of time (or both) would be an Event of Default)
has occurred and is continuing, and if so, all relevant facts with respect
thereto, together with those calculations required to demonstrate compliance
with the financial covenants set forth in Sections 6.17 through 6.19 hereof,
inclusive as applicable. The Borrower covenants and agrees to timely file its
Forms 10Q and 10K with the Securities and Exchange Commission.

(g) Copies of all proxy statements and other material reports or
statements filed with the Securities and Exchange Commission (or the National
Association of Securities Dealers) or any other governmental agency including,
without limitation, the Environmental Protection Agency and the Occupational
Safety and Health Administration within ten (10) days of the date such proxy
statements are sent to stockholders or reports or statements are sent to the
governmental or regulatory authority.

(h) Such other information as the Bank may, from time to time,
request.

Section 6.17. Total Funded Debt/Annualized EBITDA Ratio. On or
-----------------------------------------
before March 22, 1999, the Borrowers shall provide in writing to the Bank their
projected Total Funded Debt/Annualized EBITDA Ratio, on a consolidated basis, as
of the end of the fiscal quarter ending June 30, 1999.

-33-
<PAGE>

Section 6.18. Consolidated Liabilities to Tangible Net Worth Ratio.
----------------------------------------------------
On or before March 22, 1999, the Borrowers shall provide in writing to the Bank
their projected ratio of Consolidated Liabilities to Consolidated Tangible Net
Worth as of the end of the fiscal quarter ending June 30, 1999.

Section 6.19. Annualized EBITDAR. On or before March 22, 1999, the
------------------
Borrowers shall provide in writing to the Bank their projected ratio (on a
consolidated basis) of (a) Annualized EBITDAR to (b) interest expense, plus Rent
----
Expense, plus current maturities of long-term indebtedness and capital leases,
----
as of the end of the fiscal quarter ending June 30, 1999.

Section 6.20. Depository Banks. PAC and each Subsidiary shall
----------------
maintain its primary depository banking relation with the Bank (unless
unreasonably inconvenient). PAC shall provide the Bank with the names and
addresses of all financial institutions where it and each Subsidiary maintain
any depository, brokerage, investment or other accounts and the account number
of all such accounts; and such information shall be supplemented as depository
accounts are established or discontinued throughout the term of this Agreement.
Notwithstanding the foregoing, Promotora de Franquicias Praxis, S.A. de C.V., a
Mexican corporation ("PFP"), and each of the "Praxis Companies" as defined in
that certain Subscription and Stock Purchase Agreement made as of March 31,
1998, by and among PAC, Precision Auto Care Mexico I, S. de R.L. de C.V. and the
stockholders of PFP (PFP and each of the Praxis Companies, collectively, the
"Non-Borrower Mexican Subsidiaries") shall maintain their primary depository
banking relationships with one of the following financial institutions: Banco
Serfin, Banco Nationale de Mexico or Bancomer.

Section 6.21. Subordinated Debt. Between October 1 and October 15,
-----------------
1998, the Borrowers obtained $2,000,000 in additional cash equity capitalization
in the form of Subordinated Debt. The Borrowers agree that (a) they may pay
interest on the $2,000,000 in Subordinated Debt (but not more frequently than
monthly) only if no Event of Default (and no event which, with the giving of
notice or lapse of time (or both) would be an Event of Default) has occurred and
is continuing at the time of such payment and after giving effect thereto, and
(b) they may repay the outstanding principal balance of the $2,000,000 in
Subordinated Debt only if (i) no Event of Default (and no event which, with the
giving of notice or lapse of time (or both) would be an Event of Default) has
occurred and is continuing at the time of such payment and after giving effect
thereto, (ii) the outstanding principal balance of the Acquisition Line of
Credit plus the Line of Credit Portion have been permanently repaid and/or
permanently reduced to an amount not to exceed $15,000,000 and (iii) the
Borrowers have filed and delivered to the Bank a Form 10Q or Form 10K with the
Securities and Exchange Commission after such repayment and/or reduction which
indicates that, on a consolidated basis as of the end of the applicable fiscal
quarter or fiscal year, the Total Funded Debt/Annualized EBITDA Ratio was less
than 3.00 to 1.00.

Section 6.22. Permitted Sales and Financings. With respect to any
------------------------------
sales or financings described in the Recitals above and notwithstanding any
other provision of this

-34-
<PAGE>

Agreement, the Bank's consent is conditional upon the Bank's receipt at least
three business days before closing on the sale or financing of all sale or
financing documents, any appraisal information or other documents reasonably
required by the Bank to verify and confirm the terms of the sale or financing.
In addition, the Borrower shall pay over to the Bank, at any time that there are
sums due on the Line of Credit or the Acquisition Line of Credit, the Net Sale
Proceeds (less the amount necessary to satisfy the outstanding amount of any
financing encumbering the real property) of any real property described in
Recital J which the Borrowers finance and then subsequently sell.

As used above in this Article VI, the singular "Borrower" shall mean each
Borrower (except PAC) for itself, and PAC for and on behalf of itself and all
other Borrowers.

ARTICLE VII
-----------
NEGATIVE COVENANTS
------------------

PAC for itself and all other Borrowers, and each other Borrower for
itself, covenants and agrees during the term of this Agreement and while any
Obligations are outstanding and unpaid not to do or to permit to be done or to
occur any of the acts or events set forth below:

Section 7.1. Change of Name, Merger, Sale of Stock, Etc. Except as
-------------------------------------------
expressly permitted herein, liquidate, wind up or dissolve, or enter into any
consolidation, merger, or other combination, or agree to do any of the
foregoing; provided, however, that:

(a) any Subsidiary may merge or consolidate with another Person so
long as (i) the Person surviving such merger or consolidation is a Subsidiary,
and (ii) immediately after giving effect thereto, no Event of Default would
exist; and

(b) Neither PAC or any Subsidiary shall change its name without ten
(10) days' prior written notice to, and the approval of, the Bank, such approval
not to be unreasonably withheld. No Subsidiary shall issue any additional stock
unless issued to PAC, without the Bank's written consent, such consent not to be
unreasonably withheld.

Section 7.2. Sale or Transfer of Assets. Sell, lease, transfer,
--------------------------
convey or otherwise dispose of any of its assets or property, including, without
limitation, the Collateral, except for (i) sales of inventory in the ordinary
course of business; (ii) the sale of worn out or obsolete equipment for fair
market value or the exchange of used or obsolete equipment for replacement
equipment; (iii) the sale of permitted temporary or overnight investments; (iv)
sales or dispositions of assets or property having a fair market value of less
than $250,000 on an annual aggregate basis; (v) any sale, lease, transfer or
conveyance from one Subsidiary to another Subsidiary or to PAC, or from PAC to
any Subsidiary for fair consideration; and (vi) sales described in the Recitals
of this Agreement; provided that, immediately after giving effect thereto, no
Event of Default would exist.

-35-
<PAGE>

Section 7.3. Encumbrance of Assets. Create, assume or suffer to
---------------------
exist any deed of trust, mortgage or encumbrance, lien (including a lien of
attachment, judgment or execution) or security interest (including the interest
of a conditional seller of goods), securing a charge or obligation, in or on any
of its property, real or personal, whether now owned or hereafter acquired,
except for Permitted Liens and except for the liens described in Recital J
above.

Section 7.4. Transactions with Related Parties. Except as provided
---------------------------------
herein, directly or indirectly make any loan or advance to, or purchase, assume
or guarantee any indebtedness to or from, any of its officers, directors,
stockholders or Affiliates, or subcontract any operations to any Affiliate, or
enter into any other transaction with any Affiliate, except (a) in the ordinary
course of and pursuant to the reasonable requirements of business, and (b) upon
fair and reasonable terms no less favorable to PAC or such Subsidiary than would
apply in a comparable arm's-length transaction with a Person not an Affiliate.

Section 7.5. Guarantees. Without the prior written consent of the
----------
Bank, become liable, directly or indirectly, as guarantor or otherwise for any
obligation of any other Person, except for (a) the endorsement of checks,
drafts, instruments or commercial paper for deposit or collection in the
ordinary course of business; (b) the guaranty by PAC of payment and performance
with respect to the obligations of the Subsidiaries; and (c) the guaranty by PAC
of ordinary course of business obligations of any Subsidiary.

Section 7.6. Indebtedness. Incur, create, assume, or permit to exist
------------
any indebtedness except:

(a) the Loan;

(b) existing secured indebtedness previously disclosed to the Bank;

(d) indebtedness secured by a Permitted Lien;

(e) Subordinated Debt, if approved by the Bank; and

(f) intercompany debt among the Borrowers.

Section 7.7. Contingent Obligations. Create, incur, assume or suffer
----------------------
to exist any contingent obligation other than:

(a) endorsements of instruments or items of payment for deposit or
collection in the ordinary course of business;

(b) contingent obligations incurred pursuant to the Loan Documents;

-36-
<PAGE>

(c) contingent obligations consisting of the indemnification by PAC or
any of its Subsidiaries of (i) the officers, directors, employees and agents of
PAC or such Subsidiary, to the extent permissible under the Law of the
jurisdiction in which PAC or such Subsidiary is organized, (ii) commercial
banks, investment bankers and other independent consultants or professional
advisors pursuant to agreements relating to the underwriting of PAC's or such
Subsidiary's securities or the rendering of banking or professional services to
PAC or such Subsidiary, and (iii) landlords, licensors, licensees and other
parties pursuant to agreements entered into in the ordinary course of business
by PAC or such Subsidiary;

(d) contingent obligations consisting of warranties, indemnities and
guaranties regarding copyright and trademark infringement and other matters
approved by the Bank given to customers in the ordinary course of business
consistent with past practices;

(e) guarantees by any Borrower or any of its Subsidiaries of
obligations of PAC or its Subsidiaries under leases permitted hereunder; and

(f) guarantees by PAC or any of its Subsidiaries of any other
indebtedness permitted under Section 7.6.

Section 7.8. Investments. Directly or indirectly, purchase, own,
-----------
invest in or otherwise acquire any capital stock, evidence of indebtedness or
other obligation or security or any interest whatsoever in any other Person, or
make or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or become a
partner or joint venturer in any partnership or joint venture, or consummate an
Acquisition, or make a commitment or otherwise agree to do any of the foregoing,
other than:

(a) cash investments;

(b) loans and advances to employees not to exceed in the aggregate
$100,000;

(c) Accounts owing to PAC or any of its Subsidiaries created in the
ordinary course of business and payable in accordance with customary terms
prevailing in the industry;

(d) prepaid expenses incurred in the ordinary course of business;

(e) existing investments in corporations or limited liability
companies that are Subsidiaries as of the date hereof;

(f) investments in Subsidiaries;

(g) investments in and loans to Persons which do not constitute
Subsidiaries; provided, however, that the aggregate amount of all investments in
and loans to any single Person shall not exceed $100,000 at any time, and the
aggregate amount of all investments in and loans to all Persons which do not
constitute Subsidiaries shall not exceed $200,000 at any time;

-37-
<PAGE>

(h) investments by any Borrower under any swap agreement or hedging
device relating to the indebtedness incurred under this Agreement; provided that
the notional amount of all such swap agreements at any time shall not exceed the
maximum principal amount of the Loan at such time;

(i) loans or advances from a Subsidiary to PAC or to another
Subsidiary, or from PAC to a Subsidiary; and

(j) short-term loans to franchisees from time to time, however, such
loans in the aggregate shall not exceed Four Hundred Thousand Dollars ($400,000)
without the Bank's prior written consent.

Section 7.9. Dividends. Without the written consent of the Bank, pay
---------
any dividends, or make any distributions of cash or property to purchase,
redeem, retire or otherwise acquire any shares of stock or equity interests of
PAC or the Subsidiaries, except for stock dividends or stock splits or any other
corporate distribution which does not involve cash or tangible property.

Section 7.10. Acquisition of Stock or Assets of Third Person. Except
----------------------------------------------
as may be otherwise permitted under Section 7.8 hereof, acquire stock or equity
interests of any other Person, or the assets of any third person, except for
temporary investments permitted in this Agreement.

Section 7.11. Sale and Leaseback. Enter into any arrangement with
------------------
any Person (other than PAC or any of its Subsidiaries) providing for the leasing
by PAC or any of its Subsidiaries of any asset that has been sold or transferred
by PAC or such Subsidiary to such Person.

Section 7.12. New Business. Engage in any business other than
------------
businesses primarily within the line of business presently conducted by the
Subsidiaries or make any material change in any of its business objectives,
purposes and operations that would be reasonably likely to materially adversely
affect the repayment of the Loans and Obligations.

Section 7.13. Subsidiaries. Except as otherwise permitted by the
------------
terms of this Agreement, create or acquire any new Subsidiary.

Section 7.14. Transactions Affecting the Collateral. Enter into any
-------------------------------------
transaction that will have, or could reasonably be expected to have, a
Materially Adverse Effect on the Collateral or the ability of the Borrowers to
repay any of the Loans and Obligations.

Section 7.15. Hazardous Wastes. Permit any Hazardous Substances, the
----------------
removal of which is required or the maintenance of which is restricted,
prohibited or penalized by any governmental authority, to be unlawfully brought
onto or located on any real property owned or, to the extent PAC or any of its
Subsidiaries is in possession or control of same, leased

-38-
<PAGE>

by PAC or any of its Subsidiaries, except in material compliance with all
applicable environmental Laws; and if any Hazardous Substance is brought or
found located thereon in material violation of any applicable environmental
Laws, it shall be immediately removed, with proper disposal, and all required
environmental cleanup procedures shall be diligently undertaken pursuant to all
such environmental Laws, and the obligations hereunder with respect to any such
materials brought or located thereon while PAC or any of its Subsidiaries owned
or leased any such real property shall survive any foreclosure of the deeds of
trust or mortgages. EACH BORROWER HEREBY ACKNOWLEDGES THAT ALL HAZARDOUS WASTE
HANDLING PRACTICES AND ENVIRONMENTAL PRACTICES AND PROCEDURES ARE THE SOLE
RESPONSIBILITY OF PAC AND ITS SUBSIDIARIES. PAC FURTHER ACKNOWLEDGES THAT THE
BANK IS NOT AN ENVIRONMENTAL CONSULTANT, ENGINEER, INVESTIGATOR OR INSPECTOR OF
ANY TYPE WHATSOEVER.

Section 7.16. Fiscal Year. Change its fiscal year from a twelve-
-----------
month period ending June 30, provided, however, that the fiscal year of any
Person subject to the provisions hereof which is organized under the laws of
Mexico shall be a calendar year.

Section 7.17. Amendments; Prepayments of Indebtedness, Etc. (a)
---------------------------------------------
Amend in any material respect its certificate, or articles of incorporation or
articles of organization without thirty (30) days' prior written notice to the
Bank or (b) make any payment or prepayment with respect to any Subordinated
Debt, whether principal, interest or otherwise, which is not permitted under the
terms of the applicable instrument of subordination or this Agreement.

Section 7.18. No Inconsistent Transactions or Agreements. Enter into
------------------------------------------
any transaction or agreement, or enter into any amendment or other modification
to any currently existing agreement, that by its terms prohibits or materially
restricts the ability of the Borrowers to pay the principal of or interest on
the Loans and all other Obligations.

Section 7.19. Assignment of this Agreement. Assign or attempt to
----------------------------
assign this Agreement; provided, however, that PAC shall be permitted to add
additional Subsidiaries as Borrowers hereunder in accordance with the procedures
set forth in Section 10.15, the terms of any Assumption Agreement and the
approval of the Bank.

Section 7.20. Equity Ownership; Certificates. Cause or permit (a)
------------------------------
any of the Persons identified in Exhibit No. 11 attached hereto and incorporated
--------------
herein to own legal and beneficial title to less than the interest(s) indicated
in such Exhibit in each of the Persons identified therein, or (b) any of the
member interests in PAC Mexican Holding Company LLC, or any of the partnership
or other equity interests in Precision Auto Care Mexico II, S. de R.L. de C.V.
or Precision Auto Care Mexico I, S. de R.L. de C.V. to be evidenced by any
certificate or other writing ("Certificate") unless such Certificate(s) shall
have been delivered to the Bank, together with such executed instruments of
transfer and assignment as the Bank may require.

Section 7.21. Acquisitions. Make any Acquisitions without the prior
------------
written consent of the Bank, which the Bank may give or withhold in its sole
discretion.

-39-
<PAGE>

As used above in this Article VII, the singular "Borrower" shall mean each
Borrower (except PAC) for itself, and PAC for and on behalf of itself and all
other Borrowers.

ARTICLE VIII
------------
EVENTS OF DEFAULT
-----------------

The occurrence of any of the following events or circumstances by or
with respect to PAC or any other Borrower and the expiration of any applicable
cure or grace period shall constitute "Events of Default" hereunder and shall
entitle the Bank to exercise the Bank's rights and remedies under Article IX
hereof:

Section 8.1. Failure to Pay. The failure by the Borrowers to pay any
--------------
Obligation, which failure shall not be cured or discharged within a period of
five (5) days after the same becomes due and payable.

Section 8.2. Failure to Perform. The failure of the Borrowers to
------------------
perform or observe any Obligation (which failure is not specifically enumerated
in this Article VIII as an Event of Default).

Section 8.3. Failure of Warranty or Representation to be True. The
------------------------------------------------
failure of any representation or warranty provided in this Agreement to be true
and accurate in all material respects, and to continue to be true and accurate
in all material respects at all times while any of the Obligations remain
outstanding or unsatisfied.

Section 8.4. Failure to Perform Covenants Relating to Collateral.
---------------------------------------------------
The failure by the Borrowers to perform or observe any covenant or agreement
with respect to the Collateral.

Section 8.5. Failure to Perform Other Covenants. The failure by the
----------------------------------
Borrowers to perform or observe any covenant provided in this Agreement, other
than one specifically enumerated in this Article VIII as an Event of Default.

Section 8.6. Default Under Loan Documents. A breach of or default by
----------------------------
the Borrower under the terms, covenants, and conditions set forth in any other
Loan Document, which is not cured within any applicable cure or grace period.

Section 8.7. Judgments. The Borrowers shall suffer final judgments
---------
for payment of money aggregating in excess of Two Hundred Fifty Thousand Dollars
($250,000) during any calendar year and shall not discharge the same within a
period of thirty (30) days unless, pending further proceedings, the Borrowers
post a supersedes bond or execution has been effectively stayed.

Section 8.8. Levy By Secured Creditor. A secured or judgment
------------------------
creditor of any Borrower shall obtain possession, or attempt to obtain
possession, of any of the Collateral with a

-40-
<PAGE>

value in excess of Fifty Thousand Dollars ($50,000) by any means, including, but
without limitation, levy, distraint, replevin or self-help.

Section 8.9. Failure to Pay Debts to Third Persons. The Borrowers
-------------------------------------
shall (a) fail to pay any indebtedness of any material nature due any third
party and such failure shall continue beyond any applicable grace period, or (b)
suffer to exist any other event of default under any agreement binding upon any
Borrower regardless of whether default is actually declared thereunder, and such
other event of default shall continue beyond any applicable grace period,
unless, in either event, the Borrower is diligently contesting such obligation
in good faith and adequate reserves are maintained therefor.

Section 8.10. Involuntary Bankruptcy. The commencement of a
----------------------
proceeding before a court having jurisdiction against or with respect to any
Borrower in an involuntary case under the federal bankruptcy Laws or any state
insolvency or similar Laws seeking: (a) the liquidation of any Borrower, (b) a
reorganization of any Borrower or the Borrower's business and affairs, or (c)
the appointment of a receiver, liquidator, assignee, custodian, trustee, or
similar official for any Borrower or any of the Borrower's property including,
but not limited to, the Collateral, which proceeding is not dismissed within
thirty (30) days.

Section 8.11. Voluntary Bankruptcy. The commencement by any Borrower
--------------------
of a voluntary case under the federal bankruptcy Laws or any state insolvency or
similar Laws or the consent by any Borrower to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, or similar
official for the Borrower or any of the Borrower's property including, but not
limited to, the Collateral, or the making by Borrower of any assignment for the
benefit of creditors or the failure by Borrower generally to pay its debts as
they become due either as to the amount of such debts or the number of such
debts.

Section 8.12. Termination of Material Contracts. The termination,
---------------------------------
cancellation or other cessation during any twelve (12) month period of any
Material Contract or Material Contracts which, in the aggregate, eliminate
future projected revenues in excess of One Million Dollars ($1,000,000), except
for termination arising because of the expiration or termination of a franchise
agreement which has been fully performed.

Section 8.13. Material Adverse Change. Any Material Adverse Change
-----------------------
shall occur.

Section 8.14. Impairment of Collateral. Any event or series of
------------------------
events shall occur which the Bank deems, in good faith and in its sole
discretion, to impair the Collateral or other security for the Loan or otherwise
threaten the value thereof, and which adversely affects the prospects of
repayment of the Loan.

Section 8.15. Cure. Notwithstanding anything above contained in this
----
Article VIII,

-41-
<PAGE>

(a) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.6 if the Borrowers fail, within thirty (30)
days after the occurrence of an event resulting in a violation of Section 6.6,
to remedy the violation.

(b) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.7 if the Borrowers fail, within fifteen (15)
days after the occurrence of an event resulting in a violation of Section 6.7,
to remedy the violation.

(c) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.9 if the Borrowers fail to notify the Bank of
(i) any change in the location of any existing office or place of business of a
Borrower; (ii) the establishment of any new, or the discontinuance of any
existing, place of business; and (iii) any change in or addition to the location
of the place where Records are kept.

(d) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.10 if the Borrowers fail, within thirty (30)
days after the occurrence of an event resulting in a violation of Section 6.10,
to remedy the violation.

(e) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.11 if the Borrowers fail, within thirty (30)
days after the occurrence of an event resulting in a violation of Section 6.11,
to remedy the violation.

(f) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.20 if the Borrowers fail, within fifteen (15)
days after the occurrence of an event resulting in a violation of Section 6.20,
to remedy the violation.

(g) An Event of Default shall only occur by reason of the Borrowers'
failure to comply with Section 6.16 if the Borrowers fail, within five (5) days
after written notice from the Bank of a violation of Section 6.16, to remedy the
violation (and nothing in this Agreement shall be deemed a five-day extension to
deliver financial information).

Any occurrence constituting an Event of Default by reason of the
failure to comply with Section 6.2 which is specifically identified in one of
the foregoing mentioned sections shall be subject to cure as above provided.
Such cure period may, in the Bank's sole discretion, be extended if such cure is
diligently being pursued and such continuing Event of Default does not
substantially impair the prospects of repayment of the Loans. Nothing herein
contained shall limit the continuing obligation of the Borrowers to notify the
Bank of any Event of Default and the Borrowers' actions to cure such default
within the period above stated.

Upon the occurrence of an Event of Default which is not cured within
the applicable cure period, if any, the Bank shall have no further obligation to
make any additional Advances under the Line of Credit, and the Bank may declare
all Obligations immediately due and payable. All such Events of Default and
remedies are in addition to any such rights and remedies set forth in the other
Loan Documents.

-42-
<PAGE>

ARTICLE IX
----------
RIGHTS AND REMEDIES UPON THE OCCURRENCE
---------------------------------------
OF AN EVENT OF DEFAULT
----------------------

Section 9.1. Rights and Remedies. In addition to all other rights
-------------------
and remedies provided by Law and the Loan Documents, the Bank, upon the
occurrence of any Event of Default or upon Maturity, and subject to any
applicable grace or cure period, may:

(a) Refuse to make further Advances or readvances under the Line of
Credit;

(b) Require the Borrowers to deposit all collected Receivables and
cash proceeds of the Collateral, including all Accounts and General Intangibles,
at the Bank or a financial institution designated by the Bank and in an account
or accounts under the exclusive control of the Bank, with all such deposits to
be applied against Obligations outstanding under the Line of Credit Loan or the
Acquisition Line of Credit Loan as the Bank determines;

(c) Accelerate, call due and demand the immediate payment of the
unpaid principal balance of the Loans and the Consolidated Note, and all accrued
interest and other sums due as of the date of default;

(d) Foreclose any security interest, lien, assignment, or pledge
created by any Loan Document or this Agreement;

(e) Confess judgment or file suit against the Borrowers or any one of
them, on the Consolidated Note;

(f) File suit against the Borrowers or any one of them, on this
Agreement, or under any other Loan Document;

(g) Seek specific performance or injunctive relief to enforce
performance of the undertakings, duties, and agreements provided in the Loan
Documents, whether or not a remedy at law exists or is adequate;

(h) Exercise any rights of a secured creditor under the Maryland
--------
Uniform Commercial Code-Secured Transactions, Title 9, Commercial Law Article,
- -----------------------------------------------------------------------------
Annotated Code of Maryland, as amended, or any other applicable version of the
- --------------------------
Uniform Commercial Code, including the right to take possession of the
Collateral without the use of judicial process and the right to require the
Borrower to assemble the Collateral at such place as the Bank may specify; and

(i) Set-off any amounts in any account or represented by any
certificate with the Bank in the name of any Borrower or in which any Borrower
has an interest.

-43-
<PAGE>

Section 9.2. Collection of Receivables by the Bank. The Bank, at any
-------------------------------------
time or from time to time following the occurrence of an Event of Default which
is a continuing Event of Default, may terminate the Borrowers' authority to
collect the Receivables and may exercise any or all of the rights contained in
this Section 9.2. Upon such a termination of the Borrowers' authority, the Bank
shall have the right to send a notice of assignment or notice of the Bank's
security interest to any and all Account Debtors or any third party holding or
otherwise concerned with any of the Collateral, and thereafter the Bank shall
have the sole right to collect the Receivables and take possession of the
Collateral and Records relating thereto. All of the Bank's actual and
reasonable collection expenses, including Liquidation Costs, shall be charged to
the Borrowers' account and added to the Obligations. If the Bank is collecting
the Receivables as provided in this Section 9.2, the Bank shall have the right
to receive, endorse, assign and deliver in the Bank's name or the Borrowers'
name any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and the Borrowers hereby waive notice of
presentment, protest and non-payment of any instrument so endorsed. If the Bank
is collecting the Receivables directly as above provided, the Borrowers hereby
individually and collectively, jointly and severally, constitute and appoint the
Bank and/or the Bank's designee, as the Borrowers' attorney-in-fact with power
with respect to the Receivables: (a) to endorse the Borrowers' name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
of Collateral that may come into the Bank's or designee's possession; (b) to
sign the Borrowers' name on any invoice relating to any of the Receivables,
drafts against Account Debtors, assignments and verifications of Receivables and
notices to Account Debtors; (c) to notify the Post Office authorities to change
the address for delivery of mail addressed to the Borrowers; (d) to receive and
open all mail addressed to the Borrowers and accept checks, drafts, money orders
or other evidences of payment, or correspondence relating in any way to a
Receivable or other Collateral (all other items of mail shall be delivered or
made available to PAC; and (e) to do all other acts and things necessary,
proper, or convenient to carry out the terms, conditions, purposes and intent of
this Agreement. All good faith acts of the Bank as such attorney are hereby
ratified and approved, and such attorney or designee shall not be liable for any
acts of omission or commission other than acts of gross negligence or
intentional wrongdoing, nor for any error of judgment or mistake of fact or law
exercised in accordance with this Agreement. The power of attorney hereby
granted, being coupled with an interest, is irrevocable while any of the
Obligations remain unpaid. The Bank or attorney may, without notice to or
consent from the Borrowers, sue upon or otherwise collect, extend the time of
payment of or compromise or settle for cash, credit or otherwise upon any terms,
any of the Receivables or any securities, instruments or insurances applicable
to thereto or release any obligor thereon. The Bank or attorney does not, by
anything herein or in any assignment or otherwise, assume any of the Borrower's
obligations under any contract or agreement assigned to the Bank, and the Bank
or attorney shall not be responsible in any way for the performance by the
Borrowers of any of the terms and conditions thereof.

Section 9.3. Sale of Collateral. In addition to any other remedy
------------------
provided herein, upon the occurrence of any Event of Default and subject to any
applicable grace or cure period, the Bank may immediately, without
advertisement, sell in a commercially reasonable manner at public or private
sale or otherwise realize upon the whole or any part of the Collateral, or any
interest which the Borrowers may have therein. After deducting from the
proceeds of sale or

-44-
<PAGE>

other disposition of the Collateral all reasonable expenses, including all
actual and reasonable expenses for legal services, the Bank shall apply such
proceeds toward the satisfaction of the Obligations in any order or manner as
the Bank may determine. Any remainder of the proceeds after satisfaction in full
of the Obligations shall be distributed as required by applicable Law. Written
notice of any sale or other disposition shall be given to PAC and any other
Borrower whose property is being sold at least ten (10) days before the time of
any intended public sale or of the time after which any intended private sale or
other disposition of the Collateral is to be made, which the Borrowers hereby
agree shall be reasonable notice of such sale or other disposition. The
Borrowers agree to assemble, or to cause to be assembled, at the Borrowers' own
expense, the Collateral at such place or places as the Bank shall designate. At
any such sale or other disposition, the Bank may, to the extent permissible
under applicable Law, purchase the whole or any part of the Collateral, free
from any right of redemption on the part of the Borrower, which right is hereby
waived and released. The Borrowers waive the right, if any, to have the
Collateral marshaled upon a sale. Without limiting the generality of any of the
rights and remedies conferred upon the Bank under this Section, the Bank may, to
the full extent permitted by applicable Law: (a) peacefully enter upon the
premises of the Borrowers, exclude therefrom the Borrowers or any entity
connected therewith, and take immediate possession of the Collateral, either
personally or by means of a receiver appointed by a court of competent
jurisdiction, using all necessary permitted force to do so; (b) at the Bank's
option, use, operate, manage, and control the Collateral in any lawful manner
(but without any obligation to continue the business operations of the
Borrower); (c) collect and receive all rents, income, revenue, earnings, issues,
and profits therefrom; and (d) maintain, preserve, alter or remove the
Collateral as the Bank may determine in its sole discretion. The Borrower shall
indemnify and save harmless the Bank and its agents, employees, officers and
directors, for any action or inaction taken in connection therewith, except for
acts or omissions of gross negligence or intentional misconduct.

Section 9.4. Confession of Judgment. Upon the occurrence of a
----------------------
default under this Agreement, each of the Borrowers, individually and
collectively, jointly and severally, authorize any attorney admitted to practice
before any court of record in the United States, on behalf of itself and any or
all of the other Borrowers, to then confess judgment before any clerk or judge
against PAC and any or all of the Subsidiaries in the full amount due under this
Agreement, the Consolidated Note, and all other Obligations, plus attorneys'
fees equal to fifteen percent (15%) of all amounts due, or $50,000 whichever is
less. Such attorneys' fees shall relate solely to services in connection with
the action or actions relating to the confession of judgment, and shall not
diminish or alter the Borrowers' obligations to pay actual and reasonable legal
expenses of the Bank as herein provided and all Liquidation Costs. Each
Borrower consents to the jurisdiction of, and agrees that venue shall be proper
in, the Circuit Court for any County or the City of Baltimore, Maryland, and the
United States District Court for the District of Maryland, if diversity of
citizenship or other jurisdictional basis exists; and if such confession occurs
in the Commonwealth of Virginia, the Borrowers, individually, collectively,
jointly and severally, constitute and appoint Gregory A. Baugher, Douglas A.
Carson, John G. Dumm or any vice president of the Bank their true and lawful
attorney-in-fact for them, or in the name of any one or more of them, to confess
judgment in the Circuit Court for Arlington County, Virginia, in the Circuit
Court for Fairfax County, Virginia or in the Circuit Court for Loudoun County,

-45-
<PAGE>

Virginia. Each Borrower expressly waives summons and other process and the
benefit of any and every statute, ordinance or rule of court which may be
lawfully waived conferring upon any Borrower any right or privilege of
exemption, stay of execution, or supplementary proceedings, or other relief from
the enforcement or immediate enforcement of a judgment or related proceedings on
a judgment. The authority and power to appear for and enter judgment against
any Borrower shall not be extinguished by any judgment entered pursuant hereto;
such authority and power may be exercised on one or more occasions from time to
time, in the same or different jurisdictions, as often as the holder shall deem
necessary or advisable until all sums due under this Agreement have been paid in
full.

Section 9.5. Attorneys' Fees and Expenses. The Borrower shall pay
----------------------------
all Liquidation Costs and/or actual and reasonable attorneys' fees and expenses
which the Bank may incur as a result of the happening of an Event of Default,
even if judgment is not obtained or confessed and the Event of Default is cured
and the Loan is placed in good standing.

Section 9.6. Remedies Cumulative. The rights and remedies provided
-------------------
in this Agreement or in the Loan Documents or under applicable Law shall be
cumulative and the exercise of any particular right or remedy shall not preclude
the exercise of any other rights or remedies in addition to, or as an
alternative of, such right or remedy.

Section 9.7. Proof of Sums Due on the Loan. In any action or
-----------------------------
proceeding brought by the Bank to collect the sums owed on the Loan, an
affidavit made under oath by an officer of the Bank setting forth the unpaid
balance of principal, and any accrued interest, default interest, and late
charges owed on the Loan shall be presumed correct and shall be admissible in
evidence for the purpose of establishing the truth of what it asserts.

Section 9.8. Obligations of the Borrower Hereunder Unconditional.
---------------------------------------------------
The payment and performance of the Obligations shall be the absolute and
unconditional duty and obligation of the Borrowers, and shall be independent of
any defense or any rights of set-off, recoupment or counterclaim which any
Borrower might otherwise have against the Bank, and the Borrowers shall pay
absolutely net the payments of principal, and interest to be made on account of
the Loan and all other payments required hereunder, free of any deductions and
without abatement, diminution or set-off, and until such time as the Obligations
have been fully paid and performed, the Borrowers: (a) will not suspend or
discontinue any payments provided for herein in the Consolidated Note; (b) will
perform and observe all of the Borrowers' other covenants and agreements
contained in the Loan Documents, including without limitation, making all
payments required to be made to the Bank; and (c) will not terminate or attempt
to terminate the Loan Documents for any cause.

ARTICLE X
---------
GENERAL CONDITIONS AND TERMS
----------------------------

Section 10.1. Loan Costs. The Loan and all transactions relating
----------
thereto and provided for herein shall be made at no cost to the Bank and all
costs including, without

-46-
<PAGE>

limitation, the Bank's counsel fees, recordation costs, costs of documentary
stamps, photocopying expense, appraisals, lien searches, travel expenses for the
Bank's agents, employees, and counsel, and all other reasonable out of-pocket
expenses shall be paid by the Borrowers, whenever incurred, such that the
subject transactions shall be cost free to the Bank. The Bank is authorized to
debit any account or accounts maintained by the Borrowers at the Bank for the
amount of any costs for which the Borrowers have failed to reimburse the Bank.

Section 10.2. Incorporation. The terms and conditions of the Loan
-------------
Documents are incorporated by reference and made a part hereof as if fully set
forth herein. In the event of any inconsistencies between this Agreement and
any other Loan Document, the terms and conditions of this Agreement shall govern
and control.

Section 10.3. Waivers. The Bank may at any time or from time to time
-------
waive all or any of its rights under this Agreement or any other Loan Document,
but any waiver or indulgence by the Bank at any time or from time to time shall
not constitute, unless specifically so expressed by the Bank in writing (except
to the extent an express waiver need not be in writing under the provisions of
another Section of this Agreement), a future waiver of performance or exact
performance by the Borrower.

Section 10.4. No Third Party Beneficiary Rights. No Person not a
---------------------------------
party to this Agreement shall have any benefit hereunder nor have third party
beneficiary rights as a result of this Agreement or any other Loan Documents,
nor shall any party be entitled to rely on any actions or inactions of the Bank
or its agents, all of which are done for the sole benefit and protection of the
Bank.

Section 10.5. Continuing Obligation of Borrowers. The terms,
----------------------------------
conditions, and covenants set forth herein and in the Loan Documents shall
survive closing and shall constitute a continuing obligation of the Borrowers
during the course of the transaction contemplated herein. The obligations of
the Borrowers and all Collateral granted under this Agreement shall remain valid
and in effect so long as any Obligation is outstanding, unpaid or unsatisfied
between the Borrowers and the Bank.

Section 10.6. Binding Obligation. This Agreement shall be binding
------------------
upon and inure to the benefit of the Borrowers and their successors and
permitted assigns, and the Bank and its successors and assigns. Notwithstanding
the foregoing, the Bank agrees that in the absence of an Event of Default which
has not been cured (if such Event of Default is subject to cure), this Agreement
shall not be assigned, in whole or in part, without (90) days notice to PAC, and
the Bank shall advise PAC as to the selection of an assignee.

Section 10.7. Notices. Any notice required or permitted by or in
-------
connection with this Agreement or any other Loan Document shall be in writing
and made by hand delivery, by certified mail, return receipt requested, postage
prepaid, or by overnight courier for next Business Day delivery, addressed to
the party at the appropriate address set forth below or to such other address as
may be hereafter specified by written notice by any party, and shall be
considered given as of the date of hand delivery, as of three (3) days after the
date of mailing, or

-47-
<PAGE>

the date specified for delivery with an overnight courier service, independent
of the date of actual delivery, as the case may be:

If to the Bank:

FIRST UNION NATIONAL BANK
7th Floor
1970 Chain Bridge Road
McLean, Virginia 22102
Attention: John G. Dumm
Vice President

Telephone: (730) 760-5388
Facsimile: (730) 760-5817

If to PAC (which constitutes notice to all Borrowers).-

PRECISION AUTO CARE, INC.
748 Miller Drive, S.E.
Leesburg, Virginia 20175
Attention: Charles L. Dunlap
President and Chief Executive Officer
Telephone: (703) 777-9095
Telefax: (703) 779-0137

Section 10.8. Final Agreement. This Agreement and the Loan Documents
---------------
contain the final and entire agreement and understanding of the parties, and any
terms and conditions not set forth in this Agreement or the Loan Documents are
not a part of this Agreement and the understanding of the parties hereof

Section 10.9. Extensions. The payment of the Obligations hereunder
----------
may be extended, from time to time, without impairing or otherwise affecting the
liability of the Borrowers, any endorser, guarantor or other party liable
hereunder or under any Loan Document, or the continuing security interest in the
Collateral provided herein.

Section 10.10. Amendment. This Agreement may be amended, modified or
---------
altered only in writing signed by the party to be bound by the amendment,
modification or alteration.

Section 10.11. Time. Time is of the essence of this Agreement.
----

Section 10.12. Disclosure. The Bank may disclose financial
----------
information concerning the Borrowers to any other financial institution which
may share, participate or join in the Loan.

-48-
<PAGE>

Section 10.13. Number, Gender, and Captions. As used herein, the
----------------------------
singular shall include the plural and the plural may refer to only the singular.
The use of any gender shall be applicable to all genders. The captions
contained herein are for purposes of convenience only and are not a part of this
Agreement.

Section 10.14. Security Agreement; Photocopies Sufficient. This
------------------------------------------
Agreement shall constitute a security agreement as described in Section 9-
105(l)(1) of the Maryland Uniform Commercial Code - Secured Transactions, Title
--------------------------------------------------------------
9, Commercial Law Article, Annotated Code of Maryland, as amended. A carbon,
- -----------------------------------------------------
photographic, photocopy or other reproduction of this Agreement shall be
sufficient as a financing statement.

Section 10.15. Additional Borrowers and Assumption Agreement,
----------------------------------------------
Amendment to Pledge. Subject to the provisions of Section 2.2.9(b) hereof, any
- -------------------
Subsidiary created or acquired by PAC or the Subsidiaries shall join as parties
to this Agreement and assume all Obligations hereunder and under the
Consolidated Note. Any new Borrower shall deliver such additional resolutions,
certificates and agreements as the Bank may from time to time reasonably require
to grant liens or security interests to the Bank or for such other purposes.
Subject to the provisions of Section 2.2.9(b) hereof, contemporaneously with the
execution of an Assumption Agreement, PAC (or a Subsidiary if applicable) shall
execute and deliver to the Bank such written agreements as the Bank may require
pursuant to which PAC (or such Subsidiary) shall pledge and grant a first
priority security interest to the Bank in the shares of stock or other equity
interests of such new Borrower which are held by PAC (or such Subsidiary) to
further secure the Loan and all other Obligations.

Section 10.16. Joint and Several Liability. The Obligations of the
---------------------------
Borrowers hereunder are joint and several. All Persons which hereafter become
Subsidiaries and Borrowers by virtue of executing and delivering an Assumption
Agreement shall assume joint and several liability for all Obligations then
existing or thereafter created and arising hereunder and under the Consolidated
Note. Each Borrower shall have a right of contribution to obtain reimbursement
from each other Borrower for any payment made by such Borrower in respect of the
Obligations to the extent that such payment exceeds the benefit realized by such
Borrower under the Loan. Any right of contribution among the Borrowers which
arises as a result of payments made in respect of the Obligations under this
Agreement or the other Loan Documents shall be subordinate in all respect to the
Bank's right to receive payment in full of the Obligations. The Borrowers
acknowledge and agree that the right of contribution set forth above shall not
in any event be construed in a manner inconsistent with the joint and several
liability of each of the Borrowers for the repayment of all Obligations.

Section 10.17. Governing Law; Consent to Jurisdiction. This
--------------------------------------
Agreement shall be deemed to have been executed, delivered and accepted in the
State of Maryland and shall be interpreted, and the rights and liabilities of
the parties hereto determined, in accordance with the internal laws (as opposed
to conflicts of law provisions) of the State of Maryland; the Borrowers hereby
consent to the jurisdiction of any state court within Baltimore City of
Baltimore County, Maryland or any federal court located within the Northern
District of the State of Maryland for any proceeding instituted hereunder or
under any of the other Loan Documents, or arising out of

-49-
<PAGE>

or in connection with this Agreement or any of the other Loan Documents, or any
proceeding to which the Bank and any Borrower is a party, including any actions
based upon, arising out of, or in connection with any course of conduct, course
of dealing, statement (whether oral or written) or actions of the Bank or the
Borrower. The Borrower irrevocably agrees to be bound (subject to any available
right of appeal) by any judgment rendered or relief granted thereby and further
waives any objection that it may have based on lack of jurisdiction or improper
venue or forum non conveniens to the conduct of any such proceeding. The
Borrowers consent that all service of process be made by registered or certified
mail directed to any such Borrower at its address set forth herein, and service
so made shall be deemed to be completed upon the earlier of actual receipt
thereof or three (3) days after deposit in the United States mails, proper
postage prepaid and properly addressed. Nothing in this section shall affect the
right to serve legal process in any other manner permitted by law or affect the
right to bring any action or proceeding against any Borrower or its property in
the courts of any other jurisdiction.

Section 10.18. Waiver of Jury Trial. EACH PARTY HEREBY EXPRESSLY
--------------------
WAIVES ANY RIGHT TO A TRIAL BY A JURY IN ANY SUIT, ACTION OR PROCEEDING
INSTILLED IN CONNECTION WITH THIS AGREEMENT, THE LOAN OR THE OBLIGATIONS.

Section 10.19. Release. Effective as of the date of execution of
-------
this Agreement, the Borrower releases and forever waives and relinquishes all
claims, demands, obligations, liabilities and causes of action of whatsoever
kind or nature, whether known or unknown, which it has, may have, or might have
or assert now or in the future against the Bank and its directors, officers,
employees, attorneys, agents, successors, predecessors and assigns and any
affiliates, subsidiaries or related entities of the Bank and their directors,
officers, employees, attorneys, agents, successors, predecessors and assigns,
directly or indirectly, arising out of, based upon, or in any manner connected
with any transaction, event, circumstance, action, failure to act, or occurrence
of any sort or type, whether known or unknown, which occurred, existed, was
taken, permitted, or begun before the execution of this Agreement.

IN WITNESS WHEREOF, the Bank and the Borrowers have executed and
sealed this Agreement on this ______ day of February, 1999, effective as of
February 1, 1999, with the specific intention that this Agreement constitute a
document under seal.

WITNESS/ATTEST: FIRST UNION NATIONAL BANK

______________________________ By: _______________________(SEAL)
John G. Dumm
Vice President

-50-
<PAGE>

PRECISION AUTO CARE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

WE JAC CORPORATION

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PRECISION BUILDING SOLUTIONS
INCORPORATED, formerly known as
LUBE VENTURES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

ROCKY MOUNTAIN VENTURES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-51-
<PAGE>

ROCKY MOUNTAIN VENTURES II, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

MIRACLE PARTNERS, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

RALSTON CAR WASH, LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Manager

PREMA PROPERTIES, LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
General Manager

-52-
<PAGE>

MIRACLE INDUSTRIES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

KBG, LLC

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Manager

PTW, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

NATIONAL 60 MINUTE TUNE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-53-
<PAGE>

HYDRO-SPRAY CAR WASH
EQUIPMENT CO., LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Authorized Member

PRECISION TUNE AUTO CARE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

WORLDWIDE DRYING SYSTEMS, INC.

_____________________________ By: ________________________(SEAL)
Charles L. Dunlap
President and CEO

PAC MEXICAN DELAWARE HOLDING
COMPANY, INC.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PAC MEXICAN HOLDING COMPANY, LLC

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President

-54-
<PAGE>

PRECISION AUTO CARE MEXICO II,
S. de R.L. de C.V.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PRECISION AUTO CARE MEXICO I,
S. de R.L. de C.V.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

INDY VENTURES, L.L.C.

___________________________ By: ______________________(SEAL)
Charles L. Dunlap
Manager

-55-
<PAGE>

ACKNOWLEDGMENTS
---------------

STATE OF VIRGINIA, CITY/COUNTY OF ____________, to wit:

I HEREBY CERTIFY that on this __ day of February, 1999, before me, the
undersigned Notary Public, personally appeared John G. Dumm, who acknowledged
himself to be a Vice President of First Union National Bank, known to me (or
satisfactorily proved) to be the person who executed the foregoing Amended and
Restated Loan and Security Agreement and acknowledged that he, being authorized
so to do, executed the same for the purposes therein contained as the duly
authorized Vice President of First Union National Bank, by signing the name of
First Union National Bank by himself as Vice President.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

__________________________
Notary Public

My Commission Expires:

_______________________

-56-
<PAGE>

STATE OF ______________, CITY/COUNTY OF ________________, to wit:

I HEREBY CERTIFY that on this __________ day of __________________,
1999, before me, the undersigned, a Notary Public of the State of aforesaid,
personally appeared Charles L. Dunlap, who acknowledged himself to be the
President, Chief Executive Officer of Precision Auto Care, Inc., a Virginia
corporation; WE JAC Corporation, a Delaware corporation; Precision Building
Solutions, Incorporated, formerly known as Lube Ventures, Inc., a Delaware
corporation; Rocky Mountain Ventures, Inc., a Colorado corporation, Rocky
Mountain Ventures II, Inc., a Colorado corporation, Miracle Partners, Inc., a
Delaware corporation; Miracle Industries, Inc., an Ohio corporation; PTW, Inc.,
a Washington corporation; National 60 Minute Tune, Inc. a Washington
corporation; Precision Tune Auto Care, Inc. a Virginia corporation; Worldwide
Drying Systems, Inc., a Colorado corporation, PAC Mexican Delaware Holding
Company, Inc., a Delaware corporation; and the Manager of Ralston Car Wash,
Ltd., a Colorado limited liability company, the General Manager of Prema
Properties, Ltd., an Ohio limited KBG, LLC, a Colorado limited liability
company, and Indy Ventures, L.L.C., an Indiana limited liability company; the
General Manager of Prema Properties, Ltd., an Ohio limited liability company;
the Authorized Member of Hydro-Spray Car Wash Equipment Co., Ltd., an Ohio
limited liability company; the President of PAC Mexican Holding Company LLC, a
Virginia limited liability company; the President and General Manager of
Precision Auto Care Mexico II, S. de R.L. de C.V., a Mexican limited liability
company; and Precision Auto Care Mexico I, S. de R.L. de C.V., a Mexican limited
liability company; and Precision Auto Care Mexico I, S. de R.L. de C.V., a
Mexican limited liability company; and that he, as such President, Chief
Executive Officer, General Manager, Authorized Member, Manager and President and
General Manager (as applicable, being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
each of the corporations and limited liability companies by himself as
President, Chief Executive Officer, General Manager, Authorized Member, Manager
and General manager (as applicable).

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

_________________________
Notary Public

My Commission Expires:

_________________________

-57-

<PAGE>

Exhibit 10.26

IMPORTANT NOTICE

Baltimore, Maryland $21,072,860.62
February 1, 1999

THIRD CONSOLIDATED, AMENDED AND RESTATED REVOLVING
--------------------------------------------------
AND ACQUISITION LINE OF CREDIT PROMISSORY NOTE
----------------------------------------------

FOR VALUE RECEIVED, the undersigned, PRECISION AUTO CARE, INC., a Virginia
corporation ("PAC"), WE JAC CORPORATION, a Delaware corporation; PRECISION
BUILDING SOLUTIONS INCORPORATED, formerly known as LUBE VENTURES, INC., a
Delaware corporation; ROCKY MOUNTAIN VENTURES II, INC., a Colorado corporation;
MIRACLE PARTNERS, INC., a Delaware corporation; RALSTON CAR WASH, LTD., an Ohio
limited liability company; PREMA PROPERTIES, LTD., an Ohio limited liability
company; MIRACLE INDUSTRIES, INC., an Ohio corporation; KBG, LLC, a Colorado
limited liability company; PTW, INC., a Washington corporation; NATIONAL 60
MINUTE TUNE, INC., a Washington corporation; HYDRO-SPRAY CAR WASH EQUIPMENT CO.,
LTD., an Ohio limited liability company; PRECISION TUNE AUTO CARE, INC., a
Virginia corporation; WORLDWIDE DRYING SYSTEMS, INC., a Colorado corporation;
PAC MEXICAN DELAWARE HOLDING COMPANY, INC., a Delaware corporation; PAC MEXICAN
HOLDING COMPANY, LLC, a Virginia limited liability company; PRECISION AUTO CARE
MEXICO II, S. de R.L. de C.V., a Mexican limited liability company; PRECISION
AUTO CARE MEXICO I, S. de R.L. de C.V., a Mexican limited liability company; and
INDY VENTURES, L.L.C., an Indiana limited liability company (PAC and each of
such Persons are sometimes hereafter referred to individually as a "Borrower"
and collectively as the "Borrowers"), jointly and severally promise to pay to
the order of FIRST UNION NATIONAL BANK, successor by merger to Signet Bank (the
"Bank"), at the Bank's offices at 1970 Chain Bridge Road, McLean, Virginia
22102, or at such other place as the holder of this Promissory Note (the
"Promissory Note") may from time to time designate, the principal sum of Twenty-
One Million Seventy-Two Thousand Eight Hundred Sixty Dollars and Sixty-Two Cents
($21,072,860.62), or so much of the principal sum as may have been advanced or
readvanced by the Bank, and borrowed or reborrowed by the Borrowers, and which
remains outstanding and unpaid pursuant to the terms and conditions of a Loan
and Security Agreement dated November 12, 1997, as amended (as the same has been
and hereafter may be amended, extended, modified, renewed, restated or replaced
from time to time, the "Loan Agreement") and various other agreements,
documents, instruments and certificates executed and delivered in connection
therewith (collectively, the "Loan Documents"), providing to the Borrowers a
Line of Credit and an Acquisition Line of Credit (the "Loans"), together with
interest thereon at the rate hereafter specified and any and all other sums
which may be owing to the holder of this Promissory Note by the Borrowers, on
September 30, 1999, the final and absolute due date (the "Maturity Date"),
subject to acceleration as herein provided. All
<PAGE>

capitalized terms not otherwise defined herein shall have the meanings assigned
to those terms in the Loan Agreement. The following terms shall apply to this
Promissory Note:

1. Interest Rate, Additional Charges, Deemed Election and Term.

1.1 Interest Rate. For the period from the date of this Promissory
-------------
Note until all sums due hereunder have been paid in full, interest on the
outstanding and unpaid principal balance existing from time to time shall accrue
at the annual rate of the one-month LIBOR Rate, plus 4.75%. The Borrowers shall
pay interest monthly in arrears as provided below.

As used herein, the term "LIBOR Rate" applicable to any Interest Period
means that rate per annum, determined solely by the Bank, equal to the rate
quoted by the Bank in its sole discretion on the first day of such Interest
Period, as the London Interbank Offered Rate (adjusted to reflect the cost of
reserve requirements as they exist from time to time) as published by Bloomberg
or Dow Jones-Telerate, as BBA LIBOR on page 3750 (or by Reuters Monitor Money
Rates Service (LIBOR page), if Bloomberg or Dow Jones-Telerate is not
available), or such other page as may replace that page on that service for the
purpose of displaying rates or prices comparable to that rate (rounded upwards,
if necessary, to the next higher 1/100%) for deposits in United States Dollars
for a period of one (1) month. If more than one such rate appears for the one-
month rate on such page or its replacement, LIBOR Rate shall be the arithmetic
mean of such rates. In the event the first day of the Interest Period is not a
Business Day, the applicable LIBOR Rate shall be the rate in effect on the
immediately preceding Business Day. "Interest Rate" means, initially, the
period commencing on January 1, 1998, and ending one month thereafter; and after
the initial Interest Period, each period commencing on the day immediately
following the last day of the preceding Interest Period (an "Effective Date")
and ending on the corresponding day one month thereafter, provided, however,
that no Interest Period shall extend beyond the Maturity Date. Further, the
LIBOR Rate shall be effective as the rate of interest throughout such Interest
Period even if Borrowers reduce the outstanding and unpaid principal balance to
zero and thereafter during such Interest Period borrow or reborrow hereunder.

1.2. Additional Charges.
-------------------

The Borrowers shall, from time to time, pay to the Bank on demand such
amount as the Bank may reasonably determine to be necessary to compensate it for
any increased costs attributable to its making or maintaining the Loan which
result from any change in applicable law, regulation or directive, or in the
interpretation or application thereof, including specifically, without
limitation, any reserve, capital or other requirements that may be imposed by
law, regulation or guidelines adopted by any state or federal regulatory agency.
In the event that any demand for increased costs is made by the Bank, the Bank
shall provide the Borrowers with a written calculation of the increased costs
attributable to the Loan.

1.3. Interest Rate Election. (intentionally deleted)
----------------------

1.4. Interest Rate and Unused Line Fee Term. (intentionally deleted)
--------------------------------------

-2-
<PAGE>

2. Calculation of Interest. Interest shall be calculated on the basis of
-----------------------
a three hundred sixty (360) days per year factor applied to the actual days on
which there exists an outstanding and unpaid principal balance.

3. Repayment. The Borrowers shall pay to the Bank, on the first day of
---------
each month, commencing on the first day of March, 1999, accrued interest as
hereinabove set forth, computed on the daily outstanding and unpaid principal
balance of this Promissory Note. The principal amount of each Advance under the
Acquisition Line of Credit shall be repaid in consecutive equal monthly
principal installments commencing in the month following the month in which such
Advance was made and extending over a term not be exceed sixty (60) months, as
elected by PAC at the time such Advance is requested; provided, however, that in
the absence of any requested repayment term by PAC the repayment term shall be
sixty (60) months. Notwithstanding the foregoing (a) subject to the provisions
of clauses (b) and (c) below, the entire outstanding and unpaid principal
balance due under this Promissory Note (whether consisting of Advances under the
Acquisition Line of Credit, under the Line of Credit, or otherwise), together
with accrued interest thereon to the date of payment, and any and all other sums
due and owing under this Promissory Note shall be immediately due and payable on
the Maturity Date, (b) upon the occurrence of an "Event of Default" under the
Loan Agreement or any Loan Document, the terms of which are incorporated herein
by this reference, and subject to any applicable grace or cure period, the
entire outstanding and unpaid principal balance, together with the accrued
interest thereon to the date of payment, and any and all other sums due and
owing under this Promissory Note shall be immediately due and payable at the
option of the Bank, and (c) reference is made to the Loan Agreement, the
provisions of which are incorporated by reference herein, for additional
provisions with respect to the repayment and/or prepayment hereof prior to
Maturity. The Bank shall record on its books and records (i) the date and
amount of each Advance under the Line of Credit, (ii) the date, amount and
repayment schedule of each Advance under the Acquisition Line of Credit, (iii)
the date of each payment made by the Borrowers with respect to each Advance, and
such books and records shall be prima facie evidence of the matters recited
therein; provided, however, that any failure to record such dates, amounts or
terms of repayment shall not relieve the Borrowers of their obligation of
repayment under this Promissory Note.

4. Prepayment. The Borrowers may prepay this Promissory Note in whole or
----------
in part at any time or from time to time without penalty or additional interest,
and the Borrowers shall immediately and without demand prepay principal as may
be required under Section 2.1.6, Section 2.2.6 and Section 2.4 of the Loan
Agreement. Prepayment of the principal under the Acquisition Line of Credit
shall be applied to principal installment payments (including any balloon
payment) coming due in the inverse order of their maturity.

5. Application of Payments. Except as otherwise provided in the Loan
-----------------------
Agreement, all payments made hereunder shall be applied (a) first to late
penalties or other sums owing the holder, (b) then to accrued interest, and (c)
then to principal of Advances under the Line of Credit or to principal of
Advances under the Acquisition Line of Credit, as PAC shall advise the Bank at
the time of the making of such principal payment (or, in the absence of any such
advice, to Advances under the Line of Credit); provided, however, that following
the occurrence of any Event of Default and during the continuance thereof, such
payments shall be applied in such other order or proportion as the holder of
this Promissory Note, in its discretion, may determine.

-3-
<PAGE>

6. Late Payment Penalty. Should any payment of interest, principal, or
--------------------
principal and interest, or any other sum due hereunder be received by the holder
of this Promissory Note more than ten (10) days after its due date, the
Borrowers shall pay a late payment penalty equal to five percent (5%) of the
amount then due.

7. Default Interest Rate. (intentionally deleted)
---------------------

8. Confession of Judgment. Upon the occurrence of any Event of Default
----------------------
under the Loan Agreement or a default under this Promissory Note, each of the
Borrowers, individually and collectively, jointly and severally, authorize any
attorney admitted to practice before any court of record in the United States,
on behalf of itself and any or all of the other Borrowers, to then confess
judgment against the Borrower(s) in the full amount of principal, interest and
costs due under this Promissory Note, plus attorneys' fees equal to the lesser
of fifteen percent (15%) of all amounts due, or $50,000, which attorneys' fees
shall relate solely to services in connection with the confession of judgment
action. The Borrowers consent to the jurisdiction of, and agree that venue
shall be proper in, the Circuit Court for any County or the City of Baltimore,
Maryland, and the United States District Court for the District of Maryland, if
diversity of citizenship or other jurisdictional basis exists; and if such
confession occurs in the Commonwealth of Virginia, the Borrowers, individually,
collectively, jointly and severally, constitute and appoint Gregory A. Baugher,
Douglas A. Carson, John G. Dumm, or any vice president of the Bank their true
and lawful attorney-in-fact for them, or in the name of any one or more of them,
to confess judgment in the Circuit Court for Arlington County, Virginia, the
Circuit Court for Fairfax County, Virginia or the Circuit Court for Loudoun
County, Virginia. It is understood and agreed that this power of attorney shall
be deemed a power coupled with an interest and cannot be revoked. The Borrowers
expressly waive summons and other process and the benefit of any and every
statute, ordinance or rule of court which may be lawfully waived conferring upon
any Borrower any right or privilege of exemption, stay of execution, or
supplementary judgment or related proceedings on a judgment. The authority and
power to appear for and enter judgment against the Borrowers shall not be
extinguished by any judgment entered pursuant hereto; such authority and power
may be exercised on one or more occasions from time to time, in the same or
different jurisdictions, as often as the holder shall deem necessary or
advisable until all sums due under this Promissory Note have been paid in full.

9. Interest Rate After Judgment. If judgment is entered against the
----------------------------
Borrowers on this Promissory Note, the amount of the judgment entered (which may
include principal, interest, default interest, late charges, fees, and costs)
shall bear interest at the highest rate authorized under this Promissory Note as
of the date of entry of the judgment.

10. Expenses of Collection. The Promissory Note may be referred to an
----------------------
attorney for collection, whether or not suit has been filed or judgment
confessed, and the Borrowers shall pay all of the holder's costs, fees, and
expenses, including actual and reasonable attorneys' fees, resulting from such
referral.

11. Waiver of Protest. The Borrowers, and all parties to this Promissory
-----------------
Note, whether maker, endorser, or guarantor, waive demand, presentment, notice
of dishonor and protest.

-4-
<PAGE>

12. Extensions of Maturity; Waiver. All parties to this Promissory Note,
------------------------------
whether maker, endorser, or guarantor, agree that the Bank, at its option,
exercisable in writing and at its sole and absolute discretion, may extend,
waive, modify or grant indulgences with respect to any payment due hereunder,
without releasing, discharging, or affecting the liability of any such party.
Each right, power and remedy of the Bank as provided for in this Promissory Note
or now or hereafter existing at law or in equity or by statute or otherwise
shall be cumulative and concurrent and shall be in addition to every other
right, power or remedy, and the exercise or beginning of the exercise by the
Bank of any one or more of such rights, powers or remedies shall not preclude
the simultaneous or later exercise by the Bank of any or all such other rights,
powers or remedies. No failure or delay by the Bank to insist upon the strict
performance of any term, condition, covenant or agreement of this Promissory
Note, or to exercise any right, power or remedy upon a breach thereof, shall
constitute a waiver of any such term, condition, covenant or agreement or of any
such breach, or preclude the Bank from exercising any such right, power or
remedy at any later time or times unless in writing. If the Bank accepts any
payment after its due date, it shall not constitute a waiver of the Bank's right
to receive timely payment of all other amounts when due.

13. Commercial Loan. The Borrowers warrant that this Promissory Note is
---------------
the result of a commercial loan transaction within the meaning of Sections 12-
101(c) and 12-103(e), Commercial Law Article, Annotated Code of Maryland, as
amended.

14. Advance Conditions. The Bank's obligation to make advances under the
------------------
terms of this Promissory Note shall be conditioned upon and subject to
Borrowers' continued compliance with the terms of the Loan Agreement and the
other Loan Documents relating to the Loan evidenced hereby. All statements of
account rendered by the Bank to the undersigned shall be presumed to be accurate
and correct and shall constitute an account stated between the Borrowers and the
Bank, unless within twenty (20) days after the Bank's mailing of any such
statement of account, PAC shall give the Bank written notice objecting to such
statement of account and specifying the error or errors thought to be contained
in such statement.

15. Notices. Any notice of demand required or permitted by or in
-------
connection with this Promissory Note (but without implying any obligation to
give any notice or demand) shall be in writing and made by hand delivery, by
certified mail, return receipt requested, postage prepaid, or by overnight
courier service for next business day delivery, addressed to the holder of this
Promissory Note or PAC at the appropriate address set forth below, or to such
other address as may be hereafter specified by written notice by the holder of
this Promissory Note or PAC, and shall be considered given as of the date of
hand delivery if by overnight courier service, independent of the date of actual
delivery, as the case may be:

-5-
<PAGE>

If to the Bank:

FIRST UNION NATIONAL BANK
7th Floor, 1970 Chain Bridge Road
McLean, Virginia 22102
Attention: John G. Dumm
Vice President
Telephone: (703) 777-9095
Facsimile: (703) 779-0137

If to the Borrowers (notice to PAC constitutes notice to all
Borrowers):

PRECISION AUTO CARE, INC.
748 Miller Drive, S.E.
Leesburg, Virginia 20175
Attention: Charles L. Dunlap
President and Chief Executive Officer
Telephone: (703) 777-9095
Facsimile: (703) 779-0137

16. Assignability. This Promissory Note may be assigned by the holder of
-------------
this Promissory Note.

17. Binding Nature. This Promissory Note shall inure to the benefit of and
--------------
be enforceable by the Bank and the Bank's successors and assigns and any other
person to whom the Bank may grant an interest in the Borrowers' obligations to
the Bank, and shall be binding and enforceable against the Borrowers and the
Borrowers' successors.

18. Invalidity of Any Part. If any provision or part of any provision of
----------------------
this Promissory Note shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Promissory Note and this
Promissory Note shall be construed as if such invalid, illegal or unenforceable
provision or part hereof had never been contained herein, but only to the extent
of its invalidity, illegality or unenforceability.

19. Governing Law. This Promissory Note shall be strictly governed by and
-------------
construed in accordance with the laws of the State of Maryland, exclusive of its
conflict of laws rules, and the undersigned expressly acknowledges that this
Promissory Note shall be deemed for all purposes to have been executed and
delivered to the Bank within the geographic boundaries of the State of Maryland.
The Borrowers consent to the jurisdiction of, and agree venue shall be proper
in, the Circuit Court for any County or Baltimore City, Maryland, or the United
States District Court for the District of Maryland, if diversity of citizenship
or other jurisdictional basis exists, if suit is filed by the Bank to enforce or
construe this Promissory Note or any of the Loan Documents.

20. Security. The obligations under the Promissory Note are secured by
--------
certain collateral identified in the Loan Agreement, including specifically, all
now existing or hereafter

-6-
<PAGE>

arising accounts, general intangibles, chattel paper, documents, inventory,
equipment and instruments of the Borrowers, as those terms are defined in the
Maryland Uniform Commercial Code Secured Transactions, Title 9, Commercial Law
Article, Annotated Code of Maryland, as amended, and all records relating
thereto and the proceeds of the foregoing.

21. Joint and Several Liability. The liability of the makers of this
---------------------------
Promissory Note is joint and several. As used herein, the singular "Borrower"
shall mean the plural "Borrowers", and vice versa, as the context may require.

22. Agent. Each of the Borrowers hereby individually and collectively,
-----
jointly and severally, nominate, constitute and appoint PAC as its exclusive
agent and attorney-in-fact for purposes of (a) requesting advances and receiving
monies under the Promissory Note and the Loan Agreement, and (b) receiving or
giving notices hereunder, and taking any actions hereunder for and on behalf of
any or all of the Borrowers, and the Bank shall be fully indemnified, released
and acquitted from any action taken, or not taken, in reliance upon information
from, or actions taken by, PAC. This appointment is irrevocable and shall
remain in full force and effect until all obligations of the Borrowers hereunder
have been paid, in full.

23. Additional Makers. The Bank may permit additional corporate persons to
-----------------
join in and jointly and severally assume the obligations of the Borrowers
provided herein and in the Loan Agreement. Any such person who shall assume
such obligations shall do so by executing and delivering an Assumption
Agreement, the terms and conditions of which shall be acceptable in form and
content to the Bank, and such other instruments or documents as the Bank may
require.

24. Waiver of Jury Trial. Any suit, action or proceeding, whether claim,
--------------------
counterclaim or cross-claim, brought or instituted by any party hereto or any
successor or assign of any party on or with respect to this Promissory Note or
any other Loan Document, shall be tried only by a court and not by a jury. EACH
OF THE BORROWERS AND THE BANK HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY A
JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.

25. No Novation. This Promissory Note is given pursuant to the terms of
-----------
the Loan Agreement in replacement of that certain Second Consolidated, Amended
and Restated Revolving and Acquisition Line of Credit Promissory Note dated
October 1, 1998, in the original principal amount of $25,000,000 made by the
Borrowers to the order of the Bank (the "Prior Note"). The execution of this
Promissory Note and the replacement of the Prior Note hereby shall not
constitute or act as a novation, satisfaction or extinguishment of the
indebtedness evidenced by the Prior Note, and accrued and unpaid interest under
the Prior Note shall be due and payable with the first payment of interest due
hereunder.

-7-
<PAGE>

IN WITNESS WHEREOF, this Promissory Note has been executed by the Borrowers
on the ______ day of February, 1999, and effective as of the lst day of
February, 1999, with the specific intention that this Promissory Note constitute
an instrument under seal.

WITNESS/ATTEST: PRECISION AUTO CARE, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

WE JAC CORPORATION

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

PRECISION BUILDING SOLUTIONS
INCORPORATED, formerly known as
LUBE VENTURES, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

ROCKY MOUNTAIN VENTURES, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

-8-
<PAGE>

ROCKY MOUNTAIN VENTURES II, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

MIRACLE PARTNERS, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

RALSTON CAR WASH, LTD.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
Manager

PREMA PROPERTIES, LTD.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
General Manager

-9-
<PAGE>

MIRACLE INDUSTRIES, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

KBG, LLC

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
Manager

PTW, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

NATIONAL 60 MINUTE TUNE, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

-10-
<PAGE>

HYDRO-SPRAY CAR WASH
EQUIPMENT CO., LTD.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
Authorized Member

PRECISION TUNE AUTO CARE, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

WORLDWIDE DRYING SYSTEMS, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

PAC MEXICAN DELAWARE HOLDING
COMPANY, INC.

By: (SEAL)
- ----------------------- -------------------------
Charles L. Dunlap
President and CEO

-11-
<PAGE>

PAC MEXICAN HOLDING COMPANY
LLC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President

PRECISION AUTO CARE MEXICO II, S.
de R.L. de C.V.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PRECISION AUTO CARE MEXICO I, S.
de R.L. de C.V.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

INDY VENTURES, L.L.C.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Manager

-12-
<PAGE>

ACCEPTED AND AGREED
AS OF THE ____ DAY OF FEBRUARY, 1999

FIRST UNION NATIONAL BANK

By: ____________________________________________________
John G. Dumm
Vice President

-13-
<PAGE>

ACKNOWLEDGEMENTS
----------------

COMMONWEALTH OF VIRGINIA
CITY/COUNTY OF ___________________, to wit:

I HEREBY CERTIFY that on this __________ day of __________________, 1999,
before me, the undersigned, a Notary Public of the State of aforesaid,
personally appeared Charles L. Dunlap, who acknowledged himself to be the
President, Chief Executive Officer of Precision Auto Care, Inc., a Virginia
corporation; WE JAC Corporation, a Delaware corporation; Precision Building
Solutions Incorporated, formerly known as Lube Ventures, Inc., a Delaware
corporation; Rocky Mountain Ventures, Inc., a Colorado corporation, Rocky
Mountain Ventures II, Inc., a Colorado corporation, Miracle Partners, Inc., a
Delaware corporation; Miracle Industries, Inc., an Ohio corporation; PTW, Inc.,
a Washington corporation; National 60 Minute Tune, Inc. a Washington
corporation; Precision Tune Auto Care, Inc. a Virginia corporation; Worldwide
Drying Systems, Inc., a Colorado corporation, PAC Mexican Delaware Holding
Company, Inc., a Delaware corporation; and the Manager of Ralston Car Wash,
Ltd., a Colorado limited liability company, KBG, LLC, a Colorado limited
liability company, and Indy Ventures, L.L.C., an Indiana limited liability
company; the General Manager of Prema Properties, Ltd., an Ohio limited
liability company; the Authorized Member of Hydro-Spray Car Wash Equipment Co.,
Ltd., an Ohio limited liability company; the President of PAC Mexican Holding
Company LLC, a Virginia limited liability company; the President and General
Manager of Precision Auto Care Mexico II, S. de R.L. de C.V., a Mexican limited
liability company; and Precision Auto Care Mexico I, S. de R.L. de C.V., a
Mexican limited liability company; and Precision Auto Care Mexico I, S. de R.L.
de C.V., a Mexican limited liability company; and that he, as such President,
Chief Executive Officer, General Manager, Authorized Member, Manager and
President and General Manager (as applicable, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of each of the corporations and limited liability companies by himself
as President, Chief Executive Officer, General Manager, Authorized Member,
Manager and General manager (as applicable).

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

______________________________
Notary Public

My Commission Expires:

_______________________________

-14-

<PAGE>

Exhibit 10.27

LOAN AGREEMENT

THIS LOAN AGREEMENT (this "Agreement") is made as of May 17, 1999, by and
between FFCA ACQUISITION CORPORATION, a Delaware corporation ("FFCA"), whose
address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255, and PRECISION
AUTO CARE, INC., a Virginia corporation ("Debtor"), whose address is 748 Miller
Drive, SE, Leesburg, Virginia 20175.

PRELIMINARY STATEMENT:

Unless otherwise expressly provided herein, all defined terms used in this
Agreement shall have the meanings set forth in Section 1. Debtor has requested
from FFCA, and applied for, the Loans to provide long-term financing for the
Premises, and for no other purpose whatsoever. Each Loan will be evidenced by a
Note and secured by a first priority security interest in the corresponding
Premises pursuant to a Mortgage. FFCA has committed to make the Loans pursuant
to the terms and conditions of the Commitment, this Agreement and the other Loan
Documents.

AGREEMENT:

In consideration of the mutual covenants and provisions of this Agreement,
the parties agree as follows:

1. Definitions. The following terms shall have the following meanings for
all purposes of this Agreement:

"Action" has the meaning set forth in Section 10.A(4).

"Affiliate" means any Person which directly or indirectly controls, is
under common control with, or is controlled by any other Person. For purposes
of this definition, "controls", "under common control with" and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities or otherwise.

"Business Day" means any day on which FFCA is open for business other than
a Saturday, Sunday or a legal holiday, ending at 5:00 PM Phoenix, Arizona time.

"Capital Lease" has the meaning set forth in Section 7.B.

"Closing" has the meaning set forth in Section 4.

"Closing Date" has the meaning set forth in Section 4.

"Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et seq.,
as amended.

"Commitment" means that certain Commitment Letter dated February 12, 1999
between FFCA and Debtor, and any amendments or supplements thereto.
<PAGE>

"Counsel" means legal counsel to Debtor licensed in the state(s) in which
(i) the Premises are located, (ii) Debtor is incorporated or formed and (iii)
Debtor maintains its chief executive office, as selected by Debtor and approved
by FFCA.

"Debt" has the meaning set forth in Section 7.B.

"Debtor Entities" means, collectively, Debtor and any Affiliate of Debtor.

"De Minimis Amounts" means, with respect to any given level of Hazardous
Materials or Regulated Substances, that level or quantity of Hazardous Materials
or Regulated Substances in any form or combination of forms the use, storage or
release of which does not constitute a violation of or require regulation under
any Environmental Laws and is customarily employed in the ordinary course of, or
associated with, similar businesses located in the states in which the Premises
are located.

"Depreciation and Amortization" has the meaning set forth in Section 7.B.

"Disclosures" has the meaning set forth in Section 14.P.

"Environmental Condition" means any condition with respect to soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air and any environmental medium comprising or surrounding any of the
Premises, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order or liability to or against
Debtor or FFCA by any third party (including, without limitation, any
Governmental Authority), including, without limitation, any condition resulting
from the operation of Debtor's business at the Premises and/or the operation of
the business of any other property owner or operator in the vicinity of the
Premises and/or any activity or operation formerly conducted by any person or
entity on or off the Premises.

"Environmental Indemnity Agreement" or "Environmental Indemnity Agreements"
means, as the context may require, the environmental indemnity agreement dated
as of the date of this Agreement to be executed by Debtor for the benefit of the
Indemnified Parties and such other parties as are identified in such agreement
with respect to a Premises or the environmental indemnity agreements dated as of
the date of this Agreement to be executed by Debtor for the benefit of the
Indemnified Parties and such other parties as are identified in such agreement
with respect to all of the Premises, as the same may be amended from time to
time. An Environmental Indemnity Agreement will be executed for each Premises.

"Environmental Insurer" means American International Specialty Lines
Insurance Company or such other environmental insurance company as FFCA may
select.

"Environmental Laws" means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations and the like, as well as common
law, relating to Hazardous Materials, Regulated Substances or USTs and/or the
protection of human health or the environment by reason of a Release or a
Threatened Release of Hazardous Materials or Regulated Substances or relating to
liability for or costs of Remediation or prevention of Releases. "Environmental
Laws" includes, but is not limited to, the following statutes, as amended, any
successor thereto, and any regulations, rulings, orders or decrees promulgated

2
<PAGE>

pursuant thereto, and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Materials Transportation Act; the
Resource Conservation and Recovery Act (including but not limited to Subtitle I
relating to USTs); the Solid Waste Disposal Act; the Clean Water Act; the Clean
Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the
Occupational Safety and Health Act; the Federal Water Pollution Control Act; the
Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act;
the National Environmental Policy Act; and the River and Harbors Appropriation
Act. "Environmental Laws" also includes, but is not limited to, any present and
future federal, state and local laws, statutes, ordinances, rules, regulations
and the like, as well as common law: conditioning transfer of property upon a
negative declaration or other approval of a Governmental Authority of the
environmental condition of the property; requiring notification or disclosure of
Releases or other environmental condition of the Premises to any Governmental
Authority or other person or entity, whether or not in connection with transfer
of title to or interest in property; imposing conditions or requirements
relating to Hazardous Materials, Regulated Substances or USTs in connection with
permits or other authorization for lawful activity; relating to nuisance,
trespass or other causes of action related to Hazardous Materials, Regulated
Substances or USTs; and relating to wrongful death, personal injury, or property
or other damage in connection with the physical condition or use of the Premises
by reason of the presence of Hazardous Materials, Regulated Substances or USTs
in, on, under or above the Premises.

"Environmental Policies" means environmental insurance policies issued by
Environmental Insurer to FFCA with respect to the Premises, which Environmental
Policies shall be in form and substance satisfactory to FFCA in its sole
discretion.

"Event of Default" has the meaning set forth in Section 10.

"FCCR Amount" has the meaning set forth in Section 10.A(6).

"Fee" means an underwriting, site assessment, valuation, processing and
commitment fee equal to 1% of the sum of the Loan Amounts for all of the
Premises, which Fee shall be payable as set forth in Section 3.

"FFCA Entities" means, collectively, FFCA, Franchise Finance and any
Affiliate of FFCA or Franchise Finance.

"FFCA Payments" has the meaning set forth in Section 7.B.

"Fixed Charge Coverage Ratio" has the meaning set forth in Section 7.B.

"Franchise Finance" means Franchise Finance Corporation of America, a
Delaware corporation, and its successors.

"GAAP" means generally accepted accounting principles consistently applied.

3
<PAGE>

"Governmental Authority" means any governmental authority, agency,
department, commission, bureau, board, instrumentality, court or quasi-
governmental authority of the United States, the state(s) where the Premises are
located or any political subdivision thereof.

"Gross Sales" has the meaning set forth in Section 7.B.

"Ground Lease" means those ground lease relating to the Leased Premises and
all modifications, amendments and supplements thereto disclosed in the Ground
Lease Estoppel Certificate and Consent delivered with respect thereto, and all
modifications, amendments and supplements consented to by FFCA pursuant to the
terms of the Mortgage corresponding to the Leased Premises.

"Ground Lessor" means the lessor under the Ground Lease.

"Ground Lease Estoppel Certificate and Consent" has the meaning set forth
in Section 9.N.

"Hazardous Materials" means (a) any toxic substance or hazardous waste,
substance, solid waste or related material, or any pollutant or contaminant; (b)
radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contains
dielectric fluid containing levels of polychlorinated biphenyls in excess of
federal, state or local safety guidelines, whichever are more stringent, or any
petroleum product; (c) any substance, gas, material or chemical which is or may
be defined as or included in the definition of "hazardous substances," "toxic
substances," "hazardous materials," "hazardous wastes," "regulated substances"
or words of similar import under any Environmental Laws; and (d) any other
chemical, material, gas or substance the exposure to or release of which is or
may be prohibited, limited or regulated by any Governmental Authority that
asserts or may assert jurisdiction over the Premises or the operations or
activity at the Premises, or any chemical, material, gas or substance that does
or may pose a hazard to the health and/or safety of the occupants of the
Premises or the owners and/or occupants of property adjacent to or surrounding
the Premises.

"Indemnified Parties" has the meaning set forth in Section 12.

"Interest Expense" has the meaning set forth in Section 7.B.

"Leased Premises" means the Premises, located in Denver, Colorado (FFCA No.
8000-8815), in which Debtor owns a leasehold interest.

"Loan" or "Loans" means, as the context may require, the loan for each
Premises, or the loans for all of the Premises, described in Section 2.

"Loan Amount" or "Loan Amounts" means, as the context may require, the
aggregate amount set forth in Section 2 or, with respect to each Premises, the
individual amount set forth in Exhibit A.
---------

"Loan Documents" means, collectively, this Agreement, the Notes, the
Mortgages, the Environmental Indemnity Agreements, the UCC-1 Financing
Statements and all other

4
<PAGE>

documents, instruments and agreements executed in connection therewith or
contemplated thereby.

"Lost Note" has the meaning set forth in Section 7.C.

"Memorandum" has the meaning set forth in Section 9.O.

"Modified FCCR Amount" has the meaning set forth in Section 10.A(6).

"Mortgage" or "Mortgages" means, as the context may require, the deed of
trust or mortgage dated as of the date of this Agreement to be executed by
Debtor for the benefit of FFCA with respect to a Premises or the deeds of trust
or mortgages dated as of the date of this Agreement to be executed by Debtor for
the benefit of FFCA with respect to all of the Premises, as the same may be
amended from time to time. A Mortgage will be executed for each Premises.

"Net Income" has the meaning set forth in Section 7.B.

"Nondisturbance Agreements" has the meaning set forth in Section 9.N.

"Note" or "Notes" means, as the context may require, the promissory note
dated as of the date of this Agreement to be executed by Debtor in favor of FFCA
evidencing a Loan with respect to a Premises or the promissory notes dated as of
the date of this Agreement to be executed by Debtor in favor of FFCA evidencing
the Loans with respect to all of the Premises, as the same may be amended,
restated and/or substituted from time to time, including, without limitation, as
a result of the payment of the FCCR Amount or the Modified FCCR Amount pursuant
to Section 10. A Note will be executed for each Premises in the Loan Amount
corresponding to such Premises.

"Operating Lease Expense" has the meaning set forth in Section 7.B.

"Other Agreements" means, collectively, all agreements and instruments
between, among or by (1) any of the Debtor Entities, and, or for the benefit of,
(2) any of the FFCA Entities, including, without limitation, promissory notes
and guaranties; provided, however, the term "Other Agreements" shall not include
the agreements and instruments defined as the Loan Documents.

"Participation" has the meaning set forth in Section 14.P.

"Permitted Exceptions" means those recorded easements, restrictions, liens
and encumbrances set forth as exceptions in the title insurance policies issued
by Title Company to FFCA and approved by FFCA in its sole discretion in
connection with the closing of the Loans.

"Permitted Encumbrances" mean liens on (a) certain receivables and
inventory of the Debtor which are unrelated to the Premises, (b) intellectual
property of the Debtor, and (c) leasehold interests in certain equipment located
at the following addresses: (i) 9160 East 38th Street, Indianapolis, Indiana
46236, (ii) 8150 Pendleton Pike, Lawrence, Indiana 46226, and (iii) 4115 South
Emerson Avenue, Indianapolis, Indiana 46203.

5
<PAGE>

"Permitted Facility" means, with respect to all of the Premises other than
the Premises located in Stratford, Connecticut (FFCA No. 8000-8823), a Precision
Auto Wash facility, and with respect to the Premises located in Stratford,
Connecticut (FFCA No. 8000-8823), a Precision Tune Auto Care facility.

"Person" means any individual, corporation, partnership, limited liability
company, trust, unincorporated organization, Governmental Authority or any other
form of entity.

"Premises" means the parcel or parcels of real estate corresponding to the
FFCA File Numbers and addresses identified on Exhibit A attached hereto,
---------
together with all rights, privileges and appurtenances associated therewith and
all buildings, fixtures and other improvements, equipment, trade fixtures,
appliances and other personal property now or hereafter located thereon (whether
or not affixed to such real estate). As used herein, the term "Premises" shall
mean either a singular property or all of the properties collectively, as the
context may require.

"Questionnaires" means the environmental questionnaires completed by Debtor
with respect to the Premises and submitted to Environmental Insurer in
connection with the issuance of the Environmental Policies.

"Regulated Substances" means "petroleum" and "petroleum-based substances"
or any similar terms described or defined in any Environmental Laws and any
applicable federal, state, county or local laws applicable to or regulating
USTs.

"Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials, Regulated
Substances or USTs.

"Remediation" means any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Materials, Regulated Substances or USTs, any actions to prevent,
cure or mitigate any Release, any action to comply with any Environmental Laws
or with any permits issued pursuant thereto, any inspection, investigation,
study, monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or any evaluation relating to any Hazardous Materials, Regulated
Substances or USTs.

"Securitization" means one or more sales, dispositions, transfers or
assignments by FFCA or any of the other FFCA Entities to a special purpose
corporation, trust or other entity identified by FFCA or any of the other FFCA
Entities of notes evidencing obligations to repay secured or unsecured loans
owned by FFCA or any of the other FFCA Entities (and, to the extent applicable,
the subsequent sale, transfer or assignment of such notes to another special
purpose corporation, trust or other entity identified by FFCA or any of the
other FFCA Entities), and the issuance of bonds, certificates, notes or other
instruments evidencing interests in pools of such loans, whether in connection
with a permanent asset securitization or a sale of loans in anticipation of a
permanent asset securitization. Each Securitization shall be undertaken in
accordance with all requirements which may be imposed by the investors or the
rating agencies involved in each such sale, disposition, transfer or assignment
or which may be imposed by

6
<PAGE>

applicable securities, tax or other laws or regulations, including, without
limitation, laws relating to FFCA's status as a real estate investment trust.

"Securitized Loan Pool" means any pool or group of loans that are a part of
any Securitization.

"Selected Premises" has the meaning set forth in Section 10.A(6).

"Subject Premises" has the meaning set forth in Section 10.A(6).

"Substitute Documents" has the meaning set forth in Section 13.

"Substitute Premises" means one or more parcels of real property
substituted for Premises in accordance with the requirements of Section 13,
together with all rights, privileges and appurtenances associated therewith, and
all buildings, fixtures and other improvements, equipment, appliances, trade
fixtures, including, without limitation, the tanks, canopies and pumps, and
other personal property located thereon (whether or not affixed to such real
estate). For purposes of clarity, where two or more parcels of real property
comprise a Substitute Premises, such parcels or interests shall be aggregated
and deemed to constitute the Substitute Premises for all purposes of this
Agreement.

"Substitute Premises Permitted Exceptions" has the meaning set forth in
Section 13.

"Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding the Premises which
may result from such Release.

"Title Company" means the title insurance company described in Section 4.

"Transfer" has the meaning set forth in Section 14.P.

"UCC-1 Financing Statements" means such UCC-1 Financing Statements as FFCA
shall require to be executed and delivered by Debtor with respect to the
transactions contemplated by this Agreement.

"USTs" means any one or combination of tanks and associated piping systems
used in connection with the storage, dispensing and general use of Regulated
Substances.

2. Transaction. On the terms and subject to the conditions set forth in
the Loan Documents, FFCA shall make the Loans. The Loans will be evidenced by
the Notes and secured by the Mortgages. Debtor shall repay the outstanding
principal amount of the Loans together with interest thereon in the manner and
in accordance with the terms and conditions of the Notes and the other Loan
Documents. The aggregate Loan Amount shall be $7,204,000.00, allocated among
the Premises as set forth on the attached Exhibit A. The Loans shall be
---------
advanced at the Closing in cash or otherwise immediately available funds subject
to any prorations and adjustments required by this Agreement.

7
<PAGE>

3. Underwriting, Valuation, Processing and Commitment Fee. Debtor paid
FFCA and received a credit by FFCA pursuant to the Commitment for a portion of
the Fee pursuant to the Commitment, and such portion was deemed nonrefundable
and fully earned when received. The remainder of the Fee shall be paid at the
Closing and shall be deemed nonrefundable and fully earned upon the Closing.
The Fee constitutes FFCA's underwriting, valuation, processing and commitment
fee. In the event the transaction set forth in this Agreement fails to close
due to a breach or default by Debtor under this Agreement, FFCA shall retain the
portion of the Fee received by FFCA (without affecting or limiting FFCA's
remedies set forth in this Agreement).

4. Closing. (a) Each Loan shall be closed (the "Closing") within 30 days
following the satisfaction of all of the terms and conditions contained in this
Agreement, but in no event shall the date of the Closing be extended beyond May
14, 1999, unless such extension shall be approved by FFCA in its sole discretion
(the date on which the Closing shall occur is referred to herein as the "Closing
Date").

(b) FFCA has ordered a title insurance commitment for each Premises from
Lawyers Title Insurance Corporation ("Title Company"). Prior to the Closing
Date, the parties hereto shall deposit with Title Company all documents and
moneys necessary to comply with their obligations under this Agreement. All
costs of such transaction shall be borne by Debtor, including, without
limitation, the cost of title insurance and all endorsements required by FFCA,
survey charges, UCC and litigation search charges, the attorneys' fees of
Debtor, attorneys' fees and expenses of FFCA, the cost of the Environmental
Policies to be delivered pursuant to Section 9.E, FFCA's in-house site
inspection costs and fees, stamp taxes, mortgage taxes, transfer fees, escrow
and recording fees and site inspection fees for the Premises. All real and
personal property and other applicable taxes and assessments and other charges
relating to the Premises which are due and payable on or prior to the Closing
Date as well as taxes and assessments due and payable subsequent to the Closing
Date but which Title Company requires to be paid at Closing as a condition to
the issuance of the title insurance policy described in Section 9.C, shall be
paid by Debtor at or prior to the Closing. The Closing Documents shall be dated
as of the Closing Date.

Debtor and FFCA hereby employ Title Company to act as escrow agent in
connection with the transaction described in this Agreement. Title Company shall
not cause the transaction to close unless and until it has received written
instructions from FFCA and Debtor to do so. Debtor and FFCA will deliver to
Title Company all documents, pay to Title Company all sums and do or cause to be
done all other things necessary or required by this Agreement, in the reasonable
judgment of Title Company, to enable Title Company to comply herewith and to
enable any title insurance policy provided for herein to be issued. Title
Company is authorized to pay, from any funds held by it for FFCA's or Debtor's
respective credit all amounts necessary to procure the delivery of such
documents and to pay, on behalf of FFCA and Debtor, all charges and obligations
payable by them, respectively. Debtor will pay all charges payable by it to
Title Company. Title Company is authorized, in the event any conflicting demand
is made upon it concerning these instructions or the escrow, at its election, to
hold any documents and/or funds deposited hereunder until an action shall be
brought in a court of competent jurisdiction to determine the rights of Debtor
and FFCA or to interplead such documents and/or funds in an action brought in
any such court. Deposit by Title Company of such documents and funds, after
deducting therefrom its charges and its expenses and attorneys' fees incurred in
connection with

8
<PAGE>

any such court action, shall relieve Title Company of all further liability and
responsibility for such documents and funds. Title Company's receipt of this
Agreement and opening of an escrow pursuant to this Agreement shall be deemed to
constitute conclusive evidence of Title Company's agreement to be bound by the
terms and conditions of this Agreement pertaining to Title Company. Disbursement
of any funds shall be made by check, certified check or wire transfer, as
directed by Debtor and FFCA. Title Company shall be under no obligation to
disburse any funds represented by check or draft, and no check or draft shall be
payment to Title Company in compliance with any of the requirements hereof,
until it is advised by the bank in which such check or draft is deposited that
such check or draft has been honored. Title Company is authorized to act upon
any statement furnished by the holder or payee, or a collection agent for the
holder or payee, of any lien on or charge or assessment in connection with the
Premises, concerning the amount of such charge or assessment or the amount
secured by such lien, without liability or responsibility for the accuracy of
such statement. The employment of Title Company as escrow agent shall not affect
any rights of subrogation under the terms of any title insurance policy issued
pursuant to the provisions thereof.

5. Representations and Warranties of FFCA. The representations and
warranties of FFCA contained in this Section are being made by FFCA as of the
date of this Agreement and the Closing Date to induce Debtor to enter into this
Agreement and consummate the transactions contemplated herein, and Debtor has
relied, and will continue to rely, upon such representations and warranties from
and after the execution of this Agreement and the Closing. FFCA represents and
warrants to Debtor as follows:

A. Organization of FFCA. FFCA has been duly formed, is validly
existing and has taken all necessary action to authorize the execution,
delivery and performance by FFCA of this Agreement.

B. Authority of FFCA. The person who has executed this Agreement on
behalf of FFCA is duly authorized so to do.

C. Enforceability. Upon execution by FFCA, this Agreement shall
constitute the legal, valid and binding obligation of FFCA, enforceable
against FFCA in accordance with its terms.

All representations and warranties of FFCA made in this Agreement shall
survive the Closing.

6. Representations and Warranties of Debtor. The representations and
warranties of Debtor contained in this Section are being made by Debtor as of
the date of this Agreement and the Closing Date to induce FFCA to enter into
this Agreement and consummate the transactions contemplated herein, and FFCA has
relied, and will continue to rely, upon such representations and warranties from
and after the execution of this Agreement and the Closing. Debtor represents
and warrants to FFCA as follows:

A. Information and Financial Statements. Debtor has delivered to
FFCA financial statements (either audited financial statements or, if
Debtor does not have audited financial statements, certified financial
statements) and certain other information concerning

9
<PAGE>

itself, which financial statements and other information are true, correct
and complete in all material respects as of the date such financial
statements and other information were prepared or delivered to FFCA; and no
material adverse change has occurred with respect to any such financial
statements and other information provided to FFCA since the date such
financial statements and other information were prepared or delivered to
FFCA. Debtor understands that FFCA is relying upon such financial
statements and information and Debtor represents that such reliance is
reasonable. All such financial statements were prepared in accordance with
GAAP and accurately reflect as of the date of this Agreement and the
Closing Date, the financial condition of each individual or entity to which
they pertain.

B. Organization and Authority. (1) Debtor is duly organized or
formed, validly existing and in good standing under the laws of its state
of incorporation or formation, and qualified as a foreign corporation,
partnership or limited liability company, as applicable, to do business in
any jurisdiction where such qualification is required. All necessary
corporate, partnership or limited liability company action has been taken
to authorize the execution, delivery and performance of this Agreement and
the other Loan Documents.

(2) The person(s) who have executed this Agreement on behalf of Debtor
are duly authorized so to do.

C. Enforceability of Documents. Upon execution by Debtor, this
Agreement and the other Loan Documents shall constitute the legal, valid
and binding obligations of Debtor enforceable against Debtor in accordance
with their respective terms.

D. Litigation. There are no suits, actions, proceedings or
investigations pending or threatened against or involving Debtor or the
Premises before any arbitrator or Governmental Authority which might
reasonably result in any material adverse change in the contemplated
business, condition, worth or operations of Debtor or the Premises.

E. Absence of Breaches or Defaults. Debtor is not, and the
authorization, execution, delivery and performance of this Agreement and
the other Loan Documents will not result, in any breach or default under
any other document, instrument or agreement to which Debtor is a party or
by which Debtor, the Premises or any of the property of Debtor is subject
or bound. The authorization, execution, delivery and performance of this
Agreement and the other Loan Documents will not violate any applicable law,
statute, regulation, rule, ordinance, code, rule or order.

F. Utilities. The Premises are served by ample public utilities to
permit full utilization of the Premises for their intended purpose and all
utility connection fees and use charges will have been paid in full.

G. Intended Use and Zoning; Compliance With Laws. Debtor intends to
use each of the Premises solely for the operation of a Permitted Facility,
and related ingress, egress and parking, and for no other purposes. Each
of the Premises is in compliance with all applicable zoning requirements
and the use of each of the Premises as a Permitted Facility does not
constitute a nonconforming use under applicable zoning requirements. The

10
<PAGE>

Premises comply with all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders and approvals of each
Governmental Authority having jurisdiction over the Premises, including,
without limitation, all health, building, fire, safety and other codes,
ordinances and requirements, all applicable standards of the National Board
of Fire Underwriters and the Americans With Disabilities Act of 1990 and
all policies or rules of common law, in each case, as amended, and any
judicial or administrative interpretation thereof, including any judicial
order, consent, decree or judgment applicable to Debtor.

H. Area Development; Wetlands. No condemnation or eminent domain
proceedings affecting the Premises have been commenced or, to the best of
Debtor's knowledge, are contemplated. To the best of Debtor's knowledge,
the areas where the Premises are located have not been declared blighted by
any Governmental Authority. The Premises and/or the real property
bordering the Premises are not designated by any Governmental Authority as
a wetlands.

I. Licenses and Permits; Access. Debtor has all required licenses
and permits, both governmental and private, to use and operate the Premises
in the intended manner. There are adequate rights of access to public
roads and ways available to the Premises for unrestricted ingress and
egress and otherwise to permit full utilization of the Premises for their
intended purposes and all such public roads and ways have been completed
and dedicated to public use.

J. Condition of Premises. The Premises, including the equipment
located thereon, are of good workmanship and materials, fully equipped and
operational, in good condition and repair, free from structural defects,
clean, orderly and sanitary, safe, well-lit, landscaped, decorated,
attractive and well-maintained.

K. Environmental. Debtor is fully familiar with the present use of
the Premises, and, after due inquiry, Debtor has become generally familiar
with the prior uses of the Premises. No Hazardous Materials or Regulated
Substances have been used, handled, manufactured, generated, produced,
stored, treated, processed, transferred or disposed of at or on the
Premises, except in De Minimis Amounts, and no Release or Threatened
Release has occurred at or on the Premises. The activities, operations and
business undertaken on, at or about the Premises, including, but not
limited to, any past or ongoing alterations or improvements at the
Premises, are and have been at all times, in compliance with all
Environmental Laws. No further action is required to remedy any
Environmental Condition or violation of, or to be in full compliance with,
any Environmental Laws, and no lien has been imposed on the Premises by any
Governmental Authority in connection with any Environmental Condition, the
violation or threatened violation of any Environmental Laws or the presence
of any Hazardous Materials, Regulated Substances or USTs on or off the
Premises.

There is no pending or threatened litigation or proceeding before any
Governmental Authority in which any person or entity alleges the violation
or threatened violation of any Environmental Laws or the presence, Release,
Threatened Release or placement on or at the Premises of any Hazardous
Materials, Regulated Substances or USTs, except in De Minimis Amounts, or
of any facts which would give rise to any such action, nor has Debtor

11
<PAGE>

(a) received any notice (and Debtor has no actual knowledge) that any
Governmental Authority or any employee or agent thereof has determined,
threatens to determine or requires an investigation to determine that there
has been a violation of any Environmental Laws at, on or in connection with
the Premises or that there exists a presence, Release, Threatened Release
or placement of any Hazardous Materials, Regulated Substances or USTs on or
at the Premises, or the use, handling, manufacturing, generation,
production, storage, treatment, processing, transportation or disposal of
any Hazardous Materials, Regulated Substances or USTs at or on the
Premises; (b) received any notice under the citizen suit provision of any
Environmental Law in connection with the Premises or any facilities,
operations or activities conducted thereon, or any business conducted in
connection therewith; or (c) received any request for inspection, request
for information, notice, demand, administrative inquiry or any formal or
informal complaint or claim with respect to or in connection with the
violation or threatened violation of any Environmental Laws or existence of
Hazardous Materials, Regulated Substances or USTs relating to the Premises
or any facilities, operations or activities conducted thereon or any
business conducted in connection therewith, except in De Minimis Amounts.

The information and disclosures in the Questionnaires is true, correct
and complete in all material respects, FFCA and Environmental Insurer may
rely on such information and disclosures, and the person or persons
executing the Questionnaires were duly authorized to do so. Debtor
acknowledges and agrees that Environmental Insurer may rely on the
environmental representations and warranties set forth in this subsection
K, that Environmental Insurer is an intended third-party beneficiary of
such representations and warranties and that Environmental Insurer shall
have all rights and remedies available at law or in equity as a result of a
breach of such representations and warranties, including, to the extent
applicable, the right of subrogation.

L. Title to Premises; First Priority Lien. Fee title to each of the
Premises is vested in Debtor, free and clear of all liens, encumbrances,
charges and security interests of any nature whatsoever, except the
Permitted Exceptions and, notwithstanding anything to the contrary in this
Agreement or the other Loan Documents, the Permitted Encumbrances, provided
that, with respect to the Leased Premises, Debtor is the holder of a
leasehold interest in the land relating thereto and the holder of a fee
interest in the buildings and improvements relating thereto, as indicated
in the Ground Lease Estoppel Certificate and Consent. Debtor is the owner
of all equipment, trade fixtures, appliances and other personal property
located on or at each of the Premises free and clear of all liens,
encumbrances, charges and security interests of any nature whatsoever
except the Permitted Exceptions and, notwithstanding anything to the
contrary in this Agreement or the other Loan Documents, the Permitted
Encumbrances. Upon Closing, FFCA shall have a first priority lien upon and
security interest in Debtor's right, title and interest in and to the
Premises pursuant to the Mortgages and the UCC-1 Financing Statements
except the Permitted Exceptions and, notwithstanding anything to the
contrary in this Agreement or the other Loan Documents, the Permitted
Encumbrances.

M. No Other Agreements and Options. Neither Debtor nor the Premises
are subject to any commitment, obligation, or agreement, including, without
limitation, any right of first refusal, option to purchase or lease granted
to a third party, which could or

12
<PAGE>

would prevent or hinder FFCA in making the Loans or exercising any of its
rights or remedies under the Loan Documents or prevent or hinder Debtor
from fulfilling its obligations under this Agreement or the other Loan
Documents.

N. No Mechanics' Liens. To the best of Debtor's knowledge after due
inquiry, there are no outstanding accounts payable, mechanics' liens, or
rights to claim a mechanics' lien in favor of any materialman, laborer, or
any other person or entity in connection with labor or materials furnished
to or performed on any portion of the Premises. No work has been performed
or is in progress nor have materials been supplied to the Premises or
agreements entered into for work to be performed or materials to be
supplied to the Premises prior to the date hereof, which will not have been
fully paid for on or before the Closing Date, or which might provide the
basis for the filing of such liens against the Premises or any portion
thereof. Debtor shall be responsible for any and all claims for mechanics'
liens and accounts payable that have arisen or may subsequently arise due
to agreements entered into for and/or any work performed on, or materials
supplied to the Premises prior to the Closing Date. Debtor has made no
contract or arrangement of any kind the performance of which by the other
party thereto would give rise to a lien on the Premises. Debtor shall and
does hereby agree to defend, indemnify and forever hold FFCA and FFCA's
designees harmless for, from and against any and all such mechanics' lien
claims, accounts payable or other commitments relating to the Premises.

O. No Reliance. Debtor acknowledges that FFCA did not prepare or
assist in the preparation of any of the projected financial information
used by Debtor in analyzing the economic viability and feasibility of the
transaction contemplated by this Agreement. Furthermore, Debtor
acknowledges that it has not relied upon, nor may it hereafter rely upon,
the analysis undertaken by FFCA in determining the Loan Amounts, and such
analysis will not be made available to Debtor.

P. Ground Lease. Debtor has delivered to FFCA a certified true,
correct and complete copy of the Ground Lease. The Ground Lease has not
been modified, amended, supplemented or otherwise revised. The Ground
Lease is the only lease or agreement between the Ground Lessor and Debtor
with respect to the Leased Premises. The Ground Lease is in full force and
effect and constitutes the legal, valid and binding obligation of Debtor,
enforceable against Debtor in accordance with its terms. Debtor has not
assigned, transferred, mortgaged, hypothecated or otherwise encumbered the
Ground Lease or any interest therein, and Debtor has not received any
notice that the Ground Lessor has made any assignment, pledge or
hypothecation of all or any part of its interest in the Ground Lease.
Debtor has not received any notice of default from the Ground Lessor which
has not been cured or given any notice of default to the Ground Lessor
which has not been cured. No event has occurred and no condition exists
which, with the giving of notice or the lapse of time or both, would
constitute a default by the Ground Lessor or Debtor under the Ground Lease.

All representations and warranties of Debtor made in this Agreement shall
be and will remain true and complete in all respects as of and subsequent to the
Closing Date as if made and restated in full as of such time and shall survive
the Closing.

13
<PAGE>

7. Covenants. Debtor covenants to FFCA from and after the Closing Date as
follows:

A. Inspections. Debtor shall, at all reasonable times, (i) provide
FFCA and FFCA's officers, employees, agents, advisors, attorneys,
accountants, architects, and engineers with access to the Premises, all
drawings, plans, and specifications for the Premises in possession of
Debtor, all engineering reports relating to the Premises in the possession
of Debtor, the files, correspondence and documents relating to the
Premises, and the financial books and records, including lists of
delinquencies, relating to the ownership, operation, and maintenance of the
Premises (including, without limitation, any of the foregoing information
stored in any computer files), and (ii) allow such persons to make such
inspections, tests, copies, and verifications as FFCA considers necessary.

B. Fixed Charge Coverage Ratio. Until such time as all of Debtor's
obligations under the Notes and the other Loan Documents are paid,
satisfied and discharged in full, Debtor shall maintain a Fixed Charge
Coverage Ratio at all of the Premises of at least 1.25:1 in the aggregate,
as determined on the last day each fiscal year of Debtor. For purposes of
this Section, the term "Fixed Charge Coverage Ratio" shall mean with
respect to the twelve month period of time immediately preceding the date
of determination, the ratio calculated for such period of time, each as
determined in accordance with GAAP, of (a) the sum of Net Income,
Depreciation and Amortization, Interest Expense and Operating Lease
Expense, less a corporate overhead allocation (in an amount equal to 3% of
Gross Sales), to (b) the sum of the FFCA Payments, Operating Lease Expense
and the Equipment Payment Amount.

For purposes of this Section, the following terms shall be defined as set
forth below and shall be applied on an aggregate basis with respect to all of
the Premises:

"Capital Lease" shall mean any lease of any property (whether
real, personal or mixed) by Debtor with respect to one or more of the
Premises which lease would, in conformity with GAAP, be required to be
accounted for as a capital lease on the balance sheet of Debtor. The
term "Capital Lease" shall not include any operating lease.

"Debt" shall mean as directly related to all of the Premises and
the period of determination (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, indentures, notes or similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations under leases which should be,
in accordance with GAAP, accounted for as Capital Leases, and (v)
obligations under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (i) through (iv) above.

"Depreciation and Amortization" shall mean with respect to all of
the Premises the depreciation and amortization accruing during any
period of determination with respect to Debtor as determined in
accordance with GAAP.

14
<PAGE>

"Equipment Payment Amount" shall mean for any period of
determination the sum of all amounts payable during such period of
determination under all (i) leases for equipment located at one or
more of the Premises and (ii) all loans secured by equipment located
at one or more of the Premises.

"FFCA Payments" shall mean with respect to the period of
determination, the sum of all amounts payable under the Notes.

"Gross Sales" shall mean the sales or other income arising from
all business conducted at all of the Premises by Debtor during the
period of determination, less sales tax and any amounts received from
not-for-profit sales of all non-food items approved for use in
connection with promotional campaigns, if any.

"Interest Expense" shall mean for any period of determination,
the sum of all interest accrued or which should be accrued in respect
of all Debt of Debtor allocable to one or more of the Premises and all
business operations thereon during such period (including interest
attributable to Capital Leases), as determined in accordance with
GAAP.

"Net Income" shall mean with respect to the period of
determination, the aggregate net income or net loss of Debtor
allocable to all of the Premises. In determining the amount of Net
Income, (i) adjustments shall be made for nonrecurring gains and
losses allocable to the period of determination, (ii) deductions shall
be made for Depreciation and Amortization, Interest Expense and
Operating Lease Expense allocable to the period of determination, and
(iii) no deductions shall be made for (x) income taxes or charges
equivalent to income taxes allocable to the period of determination,
as determined in accordance with GAAP, or (y) corporate overhead
expense allocable to the period of determination.

"Operating Lease Expense" shall mean the sum of all payments and
expenses incurred by Debtor under any operating leases with respect to
one or more of the Premises and the business operations thereon during
the period of determination, including, without limitation, the Ground
Lease, as determined in accordance with GAAP.

Notwithstanding the foregoing, FFCA shall have the right to divide the
Loans (and the corresponding Loan Documents) into one or more Securitized
Loan Pools in connection with one or more Securitizations. If any
Securitized Loan Pool does not include all of the Loans, Debtor shall
maintain with respect to the Loans in each Securitized Loan Pool an
aggregate Fixed Charge Coverage Ratio, as determined on the date set forth
above, of at least 1.25:1 for all of the Premises corresponding to the
Loans in such Securitized Loan Pool, which Fixed Charge Coverage Ratio
requirement shall be in addition to the requirement to maintain an
aggregate Fixed Charge Coverage Ratio of at least 1:25:1 for all of the
Premises not included in any Securitized Loan Pool, and shall apply until
such time as all of the Debtor's obligations under the Notes and the other
Loan Documents

15
<PAGE>

corresponding to such Loans are paid, satisfied and discharged in full. To
the extent that an aggregate Fixed Charge Coverage Ratio requirement is
imposed by FFCA with respect to the Loans in any Securitized Loan Pool, for
the purposes of determining whether or not such Fixed Charge Coverage Ratio
requirement has been satisfied, the definitions relating to the Fixed
Charge Coverage Ratio shall be deemed to be modified as applicable to
provide for the calculation of the aggregate Fixed Charge Coverage Ratio
for all of the Premises corresponding to such Securitized Loan Pool and the
aggregate Fixed Charge Coverage Ratio for all of the Premises which are not
included in any Securitized Loan Pool rather than a calculation of the
aggregate Fixed Charge Coverage Ratio for all of the Premises.

C. Lost Note. Debtor shall, if any Note is mutilated, destroyed,
lost or stolen (a "Lost Note"), promptly deliver to FFCA, upon receipt of
an affidavit from FFCA stipulating that such Note has been mutilated,
destroyed, lost or stolen, in substitution therefor, a new promissory note
containing the same terms and conditions as such Lost Note with a notation
thereon of the unpaid principal and accrued and unpaid interest. Debtor
shall provide fifteen (15) days' prior notice to FFCA before making any
payments to third parties in connection with a Lost Note.

D. Affiliate Transactions. Unless otherwise approved by FFCA, all
transactions between Debtor and any of its Affiliates shall be on terms
substantially as advantageous to Debtor as those which could be obtained by
Debtor in a comparable arm's length transaction with a non-Affiliate of
Debtor.

E. Lease Modifications. The Ground Lease shall not be modified,
amended, terminated, cancelled or surrendered without FFCA's prior written
consent.

8. Transaction Characterization. This Agreement is a contract to extend a
financial accommodation (as such term is used in the Code) for the benefit of
Debtor. It is the intent of the parties hereto that the business relationship
created by this Agreement, the Notes, the Mortgages and the other Loan Documents
is solely that of creditor and debtor and has been entered into by both parties
in reliance upon the economic and legal bargains contained in the Loan
Documents. None of the agreements contained in the Loan Documents is intended,
nor shall the same be deemed or construed, to create a partnership (either de
jure or de facto) between Debtor and FFCA, to make them joint venturers, to make
Debtor an agent, legal representative, partner, subsidiary or employee of FFCA,
nor to make FFCA in any way responsible for the debts, obligations or losses of
Debtor.

9. Conditions of Closing. The obligation of FFCA to consummate the
transaction contemplated by this Agreement is subject to the fulfillment or
waiver of each of the following conditions:

A. Title. Fee title to each of the Premises shall be vested in
Debtor, free of all liens, encumbrances, restrictions, encroachments and
easements, except the Permitted Exceptions and the liens created by the
Mortgages and the UCC-1 Financing Statements, provided that, with respect
to the Leased Premises, Debtor shall be the holder of a leasehold interest
in the land relating thereto and the holder of a fee interest in the
buildings and

16
<PAGE>

improvements relating thereto, as indicated in the Ground Lease Estoppel
Certificate and Consent. Debtor shall be the owner of all of the equipment,
trade fixtures, appliances and other personal property located on or at
each of the Premises free and clear of all liens, encumbrances, charges and
security interests, except the liens created by the Mortgages and the UCC-1
Financing Statements. Upon Closing, FFCA will obtain a valid and perfected
first priority lien upon and security interest in Debtor's right, title and
interest in and to each of the Premises.

B. Condition of Premises. FFCA shall have inspected and approved the
Premises, the Premises and the equipment located thereon shall be in good
condition and repair, free from structural defects, and of good workmanship
and materials, and the Premises shall be fully equipped and operational,
clean, orderly, sanitary, safe, well-lit, landscaped, decorated, attractive
and with a suitable layout, physical plant, traffic pattern and location,
all as determined by FFCA in its sole discretion.

C. Evidence of Title. FFCA shall have received for each of the
Premises a preliminary title report and irrevocable commitment to insure
title in the amount of the Loan relating to such Premises, by means of a
mortgagee's, ALTA extended coverage policy of title insurance (or its
equivalent, in the event such form is not issued in the jurisdiction where
the Premises is located) issued by Title Company showing good and
marketable fee title in such Premises in Debtor, committing to insure
FFCA's first priority lien upon and security interest in such Premises
subject only to Permitted Exceptions, and containing such endorsements as
FFCA may require. FFCA shall also have received evidence reasonably
satisfactory to FFCA that Debtor is the owner of all of the equipment,
trade fixtures, appliances and other personal property located on or at
each of the Premises free and clear of all liens, encumbrances, charges and
security interests, except the liens created by the Mortgages and the UCC-1
Financing Statements.

D. Survey. FFCA shall have received a current ALTA survey of each of
the Premises, the form and substance of which shall be satisfactory to FFCA
in its sole discretion. Debtor shall have provided FFCA with evidence
satisfactory to FFCA that the location of each of the Premises is not
within the 100-year flood plain or identified as a special flood hazard
area as defined by the Federal Insurance Administration, or if any Premises
is in such a flood plain or special flood hazard area, Debtor shall provide
FFCA with evidence of flood insurance maintained on such Premises in
amounts and on terms and conditions satisfactory to FFCA.

E. Environmental. FFCA shall have received an Environmental Policy
with respect to each of the Premises.

F. Zoning. Debtor shall have provided FFCA with evidence
satisfactory to FFCA that each of the Premises is properly zoned for use as
a Permitted Facility and that such use constitutes a legal, conforming use
under applicable zoning requirements.

G. Compliance With Representations, Warranties and Covenants. All
obligations of Debtor under this Agreement shall have been fully performed
and complied with, and no event shall have occurred or condition shall
exist which would, upon the

17
<PAGE>

Closing Date, or, upon the giving of notice and/or passage of time,
constitute a breach or default hereunder or under the Loan Documents or any
other agreement between or among FFCA or Debtor pertaining to the subject
matter hereof, and no event shall have occurred or condition shall exist or
information shall have been disclosed by Debtor or discovered by FFCA which
has had or would have a material adverse effect on the Premises, Debtor or
FFCA's willingness to consummate the transaction contemplated by this
Agreement, as determined by FFCA in its sole and absolute discretion.

H. Proof of Insurance. Debtor shall have delivered to FFCA
certificates of insurance and copies of insurance policies showing that all
insurance required by the Loan Documents and providing coverage and limits
satisfactory to FFCA are in full force and effect.

I. Opinion of Counsel to Debtor. Debtor shall have caused Counsel to
prepare and deliver an opinion to FFCA in form and substance satisfactory
to FFCA and its counsel.

J. Availability of Funds. FFCA presently has sufficient funds to
discharge its obligations under this Agreement. In the event that the
transaction contemplated by this Agreement does not close on or before the
date established for Closing under Section 4(a) hereof, FFCA does not
warrant that it will thereafter have sufficient funds to consummate the
transaction contemplated by this Agreement.

K. Compliance with First Union Covenants. Debtor shall have provide
FFCA with a true, correct and complete copy of that certain Amended and
Restated Loan and Security Agreement (the "First Union Agreement")
currently in effect between Debtor and First Union National Bank ("First
Union"). Debtor shall have demonstrated to FFCA's satisfaction that Debtor
is in compliance with the First Union Agreement, and that upon the Closing
Debtor will continue to be in compliance with the First Union Agreement.

N. Ground Lease. The Ground Lease shall be in full force and effect
and Debtor shall be entitled to occupy the Leased Premises. FFCA shall
have approved the Ground Lease in its sole discretion and Debtor shall have
delivered to FFCA an estoppel certificate and consent from Ground Lessor,
the form and substance of which shall be satisfactory to FFCA in its sole
discretion (the "Ground Lease Estoppel Certificate and Consent"). If any
mortgages or deeds of trust (or other similar security agreements) encumber
fee simple title to the Leased Premises, the holders of such instruments
shall have delivered nondisturbance agreements to Debtor and FFCA with
respect to the Ground Lease in form and substance acceptable to FFCA in its
reasonable discretion (the "Nondisturbance Agreements").

O. Memoranda. Debtor shall have provided FFCA with a copy of a
recorded memorandum of lease (the "Memorandum") for the Leased Premises;
provided, however, if a Memorandum has not been recorded for the Leased
Premises, Debtor shall execute and deliver, and cause the Ground Lessor to
execute and deliver, a Memorandum in recordable form for the Ground Lease.

18
<PAGE>

P. Closing Documents. At or prior to the Closing Date, FFCA and/or
Debtor, as may be appropriate, shall execute and deliver or cause to be
executed and delivered to Title Company or FFCA, as may be appropriate, all
documents required to be delivered by this Agreement, and such other
documents, payments, instruments and certificates, as FFCA may require in
form acceptable to FFCA, including, without limitation, the following:

(1) Notes;
(2) Mortgages;
(3) Proof of Insurance;
(4) Opinion of Counsel to Debtor;
(5) Evidence of satisfactory zoning;
(6) UCC-1 Financing Statements;
(7) Environmental Indemnity Agreements;
(8) Ground Lease Estoppel Certificate and Consent;
(9) Nondisturbance Agreements, as applicable;
(10) Memorandum.

Upon fulfillment or waiver of all of the above conditions, FFCA shall deposit
funds necessary to close this transaction with the Title Company and this
transaction shall close in accordance with the terms and conditions of this
Agreement.

10. Default and Remedies. A. Each of the following shall be deemed an
event of default by Debtor (each, an "Event of Default"):

(1) If any representation or warranty of Debtor set forth in any of
the Loan Documents is false in any material respect, or if Debtor renders
any false statement or account.

(2) If any principal, interest or other monetary sum due under the
Notes, the Mortgages or any other Loan Document is not paid within five
days after the date when due; provided, however, notwithstanding the
occurrence of such an Event of Default, FFCA shall not be entitled to
exercise its rights and remedies set forth below unless and until FFCA
shall have given Debtor notice thereof and a period of five days from the
delivery of such notice shall have elapsed without such Event of Default
being cured.

(3) If Debtor fails to observe or perform any of the other covenants
(except with respect to a breach of the Fixed Charge Coverage Ratio, which
breach is addressed in subitem (6) below), conditions, or obligations of
this Agreement; provided, however, if any such failure does not involve the
payment of any monetary sum, is not willful or intentional, does not place
any rights or interest in collateral of FFCA in immediate jeopardy, and is
within the reasonable power of Debtor to promptly cure after receipt of
notice thereof, all as determined by FFCA in its reasonable discretion,
then such failure shall not constitute an Event of Default hereunder,
unless otherwise expressly provided herein, unless and until FFCA shall
have given Debtor notice thereof and a period of 30 days shall have
elapsed, during which period Debtor may correct or cure such failure, upon
failure of which an Event of Default shall be deemed to have occurred
hereunder without further notice or demand of any kind being required. If
such failure cannot

19
<PAGE>

reasonably be cured within such 30-day period, as determined by FFCA in its
reasonable discretion, and Debtor is diligently pursuing a cure of such
failure, then Debtor shall have a reasonable period to cure such failure
beyond such 30-day period, which shall not exceed 90 days after receiving
notice of the failure from FFCA. If Debtor shall fail to correct or cure
such failure within such 90-day period, an Event of Default shall be deemed
to have occurred hereunder without further notice or demand of any kind
being required.

(4) If Debtor becomes insolvent within the meaning of the Code, files
or notifies FFCA that it intends to file a petition under the Code,
initiates a proceeding under any similar law or statute relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts
(collectively, an "Action"), becomes the subject of either a petition under
the Code or an Action, or is not generally paying its debts as the same
become due.

(5) If there is an "Event of Default" under any other Loan Document or
a breach or default, after the passage of all applicable notice and cure or
grace periods, under any of the Other Agreements.

(6) If there is a breach of the Fixed Charge Coverage Ratio
requirement and FFCA shall have given Debtor notice thereof and Debtor
shall have failed within a period of 30 days from the delivery of such
notice to either (i) pay to FFCA the FCCR Amount (without premium or
penalty) with respect to such of the Premises (starting with the Premises
with the lowest Fixed Charge Coverage Ratio and proceeding in ascending
order to the Premises with the next lowest Fixed Charge Coverage Ratio) as
is necessary to cure the breach of the Fixed Charge Coverage Ratio
requirement and for which the then Fixed Charge Coverage Ratio (with the
definitions in Section 7.B being deemed to be modified as applicable to
provide for the calculation of the Fixed Charge Coverage Ratio for each
such Premises on an individual basis rather than on an aggregate basis with
the other Premises) is below 1.25:1 (each, a "Subject Premises"), (ii)
prepay the Note or Notes corresponding to the Subject Premises in whole but
not in part (without premium or penalty), or (iii) notify FFCA of Debtor's
election to substitute a Substitute Premises for each Subject Premises in
accordance with the terms of Section 13 (the failure of Debtor to complete
such substitution within 60 days after FFCA shall have given the notice
discussed above shall be deemed to be an Event of Default without further
notice or demand of any kind being required). For purposes of the
preceding sentence, "FCCR Amount" means that sum of money which, when
subtracted from the outstanding principal amount of the Note corresponding
to a Subject Premises and assuming the resulting principal balance is
reamortized in equal monthly payments over the remaining term of such Note
at the rate of interest set forth therein, will result in an adjusted
aggregate Fixed Charge Coverage Ratio for all of the Premises of at least
1.25:1 based on the prior year's operations. Promptly after Debtor's
payment of the FCCR Amount, Debtor and FFCA shall execute an amendment to
each such Note in form and substance reasonably acceptable to FFCA reducing
the principal amount payable to FFCA under such Note and reamortizing the
principal amount of such Note in equal monthly payments over the then
remaining term of such Note at the rate of interest set forth therein.

20
<PAGE>

Notwithstanding the foregoing, to the extent that, in accordance with
the provisions of Section 7.B, FFCA shall have imposed an aggregate Fixed
Charge Coverage Ratio requirement with respect to all of the Premises
corresponding to the Loans in any Securitized Loan Pool, then, in order to
prevent an Event of Default from occurring by reason of a breach of such
aggregate Fixed Charge Coverage Ratio requirement, Debtor must either (i)
pay to FFCA the Modified FCCR Amount (without premium or penalty) within
the aforesaid 30 day period with respect to such of the Premises
corresponding to the Loans in such Securitized Loan Pool (starting with the
Premises with the lowest Fixed Charge Coverage Ratio and proceeding in
ascending order to the Premises with the next lowest Fixed Charge Coverage
Ratio) as is necessary to cure the breach of such aggregate Fixed Charge
Coverage Ratio requirement and for which the then Fixed Charge Coverage
Ratio (with the definitions relating to the Fixed Charge Coverage Ratio
being deemed to be modified as applicable to provide for the calculation of
the Fixed Charge Coverage Ratio for each such Premises on an individual
basis rather than on an aggregate basis with the other Premises
corresponding to the Loans in such Securitized Loan Pool) is below 1.25:1
(each a "Selected Premises"), (ii) prepay the Note or Notes corresponding
to the Selected Premises in whole but not in part (without premium or
penalty) within the aforesaid 30 day period, or (iii) notify FFCA of
Debtor's election to substitute a Substitute Premises for each Selected
Premises in accordance with the terms of Section 13 (the failure of Debtor
to complete such substitution within 60 days after FFCA shall have given
Debtor the notice discussed above shall be deemed to be an Event of Default
without further notice or demand of any kind being required). For purposes
of the preceding sentence, "Modified FCCR Amount" means that sum of money
which, when subtracted from the outstanding principal amount of the Note
corresponding to a Selected Premises, and assuming the resulting principal
balance is reamortized in equal monthly payments over the remaining term of
such Note at the rate of interest set forth therein, will result in an
adjusted aggregate Fixed Charge Coverage Ratio for all of the Premises
corresponding to the Loans in such Securitized Loan Pool of at least 1.25:1
based on the prior year's operations. Promptly after Debtor's payment of
the Modified FCCR Amount, Debtor and FFCA shall execute an amendment to
each such Note in form and substance reasonably acceptable to FFCA reducing
the principal amount payable to FFCA under such Note and reamortizing the
principal amount of such Note in equal monthly payments over the then
remaining term of such Note at the rate of interest set forth therein.

(7) If there is a breach or default, after the passage of any
applicable notice and grace period, under the Ground Lease or if the Ground
Lease terminates or expires prior to the scheduled maturity date of the
Note corresponding to the Leased Premises.

B. Upon the occurrence of an Event of Default, subject to the limitations
set forth in subsection A, FFCA may declare all or any part of the obligations
of Debtor under the Notes, this Agreement and any other Loan Document to be due
and payable, and the same shall thereupon become due and payable without any
presentment, demand, protest or notice of any kind except as otherwise expressly
provided herein, and Debtor hereby waives notice of intent to accelerate the
obligations secured by the Mortgages and notice of acceleration. Thereafter,
FFCA may exercise, at its option, concurrently, successively or in any
combination, all remedies available at law or in equity, including without
limitation any one or more of the remedies available under the Notes, the
Mortgages or any other Loan Document. Neither the acceptance

21
<PAGE>

of this Agreement nor its enforcement shall prejudice or in any manner affect
FFCA's right to realize upon or enforce any other security now or hereafter held
by FFCA, it being agreed that FFCA shall be entitled to enforce this Agreement
and any other security now or hereafter held by FFCA in such order and manner as
it may in its absolute discretion determine. No remedy herein conferred upon or
reserved to FFCA is intended to be exclusive of any other remedy given hereunder
or now or hereafter existing at law or in equity or by statute. Every power or
remedy given by any of the Loan Documents to FFCA, or to which FFCA may be
otherwise entitled, may be exercised, concurrently or independently, from time
to time and as often as may be deemed expedient by FFCA.

11. Assignments. A. FFCA may assign in whole or in part its rights under
this Agreement, including, without limitation, in connection with any Transfer,
Participation and/or Securitization. Upon any unconditional assignment of
FFCA's entire right and interest hereunder, FFCA shall automatically be
relieved, from and after the date of such assignment, of liability for the
performance of any obligation of FFCA contained herein.

B. Debtor shall not, without the prior written consent of FFCA, sell,
assign, transfer, mortgage, convey, encumber or grant any easements or other
rights or interests of any kind in the Premises, any of Debtor's rights under
this Agreement or any interest in Debtor, whether voluntarily, involuntarily or
by operation of law or otherwise, including, without limitation, by merger,
consolidation, dissolution or otherwise, except, subsequent to the Closing, as
expressly permitted by the Mortgages.

12. Indemnity. Debtor agrees to indemnify, hold harmless and defend FFCA
and its directors, officers, shareholders, employees, successors, assigns,
agents, contractors, subcontractors, experts, licensees, affiliates, lessees,
lenders, mortgagees, trustees and invitees, as applicable (collectively, the
"Indemnified Parties"), for, from and against any and all losses, costs, claims,
liabilities, damages and expenses, including, without limitation, reasonable
attorneys' fees and court costs, arising as the result of an Environmental
Condition and/or a breach of any of the representations, warranties, covenants,
agreements or obligations of Debtor set forth in this Agreement or any other
Loan Document. Without limiting the generality of the foregoing, such indemnity
shall include, without limitation, any engineering, governmental inspection and
reasonable attorneys' fees and expenses that the Indemnified Parties may incur
by reason of any representation set forth in this Agreement being false, or by
reason of any investigation or claim of any Governmental Authority in connection
therewith.

13. Substitution. Debtor shall have the right to obtain a release of all
liens granted in favor of FFCA with respect to (x) a Premises by substituting a
Substitute Premises for such Premises, if permitted by the terms of Section
10.A(6) (each a "FCCR Substitution"), and (y) up to three of the Premises by
substituting Substitute Premises for such Premises (each, a "General
Substitution"), subject to fulfillment of the following conditions:

(i) Debtor shall provide FFCA with notice of its intention to
substitute a Substitute Premises (X) with respect to each FCCR
Substitution, within the applicable 30 day period contemplated by Section
10.A(6) and the closing of such substitution shall take place within the
applicable 60 day period contemplated by such subsection, and (Y) with
respect to each General Substitution, at least 60 days prior to the
proposed date of

22
<PAGE>

substitution and the closing of such substitution shall take place within the 60
day period following the delivery of such notice to FFCA;

(ii) Debtor must provide for the substitution of a Substitute
Premises, and the proposed Substitute Premises must:

(1) be a Permitted Facility, in good condition and repair,
ordinary wear and tear excepted;

(2) have for the twelve-month period preceding the date of the
closing of such substitution a Fixed Charge Coverage Ratio (with the
definitions of Section 7.B being deemed to be modified if necessary
and as applicable to provide for a calculation of the Fixed Charge
Coverage Ratio for the Premises on an individual basis rather than on
an aggregate basis with the other Premises) at least equal the greater
of (A) the Fixed Charge Coverage Ratio for the Premises being
replaced, (B) the Fixed Charge Coverage Ratio as of the Closing Date
for the Premises being replaced and (C) 1.25:1, and the substitution
must not cause a breach of any Fixed Charge Coverage Ratio requirement
otherwise set forth in this Agreement;

(3) be owned by and vested in Debtor, free and clear of all
liens and encumbrances, except such matters as are acceptable to FFCA
(the "Substitute Premises Permitted Exceptions");

(4) have a fair market value at least equal to the greater of
(A) the then fair market value of the Premises to be replaced or (B)
the fair market value as of the Closing Date of the Premises to be
replaced, all as reasonably determined by FFCA's in-house inspectors
and underwriters.

(iii) FFCA shall have inspected and approved the Substitute Premises
utilizing FFCA customary site inspection and underwriting approval
criteria. Debtor shall have reimbursed FFCA for all of its costs and
expenses incurred with respect to such proposed substitution, including,
without limitation, FFCA's third-party and/or in-house site inspectors'
costs and expenses with respect to the proposed Substitute Premises.
Debtor shall be solely responsible for the payment of all costs and
expenses resulting from such proposed substitution, including, without
limitation, the cost of title insurance and endorsements, survey charges,
stamp taxes, mortgage taxes, transfer fees, escrow and recording fees, the
cost of environmental reports and/or environmental insurance and the
attorneys' fees and expenses of counsel to Debtor and FFCA.

(iv) FFCA shall have received a preliminary title report and
irrevocable commitment to insure title by means of a mortagee's ALTA
extended coverage policy of title insurance (or its equivalent, in the
event such form is not issued in the jurisdiction where the proposed
Substitute Premises is located) for such proposed Substitute Premises
issued by Title Company showing good and marketable title in Debtor and
committing to insure FFCA's first priority lien upon and security interest
in the proposed Substitute

23
<PAGE>

Premises, subject only to the Substitute Premises Permitted Exceptions and
containing endorsements substantially comparable to those required by FFCA
at the Closing.

(v) FFCA shall have received a current ALTA survey of such proposed
Substitute Premises, the form of which shall be comparable to those
received by FFCA at the Closing and sufficient to cause the standard survey
exceptions set forth in the title policy referred to in the preceding
subsection to be deleted, and disclosing no matters other than the
Substitute Premises Permitted Exceptions.

(vi) FFCA shall have received an environmental insurance policy with
respect to such proposed Substitute Premises, which environmental insurance
policy shall be in form and substance and issued by such environmental
insurance company as is acceptable to FFCA in its sole discretion.

(vii) Debtor shall deliver, or cause to be delivered, with respect to
Debtor and the Substitute Premises, opinions of Counsel in form and
substance comparable to those received at Closing (but also addressing such
matters unique to the Substitute Premises as may be reasonably required by
FFCA).

(viii) no Event of Default shall have occurred under any of the Loan
Documents.

(ix) Debtor shall have executed such documents as are comparable to
the security documents executed and delivered at Closing, as applicable
(but with such revisions as may be reasonably required by FFCA to address
matters unique to the Substitute Premises) or amendments to such documents,
including, without limitation, the Mortgage and UCC Financing Statements
(the "Substitute Documents"), to provide FFCA with a first priority lien on
the proposed Substitute Premises (or with respect to proposed Substitute
Premises subject to ground leases, a first priority lien on the
improvements located at such proposed Substitute Premises and Debtor's
leasehold interest in the land thereunder), subject only to the Substitute
Premises Permitted Exceptions, and all other rights, remedies and benefits
with respect to the proposed Substitute Premises which FFCA holds in the
Premises to be replaced, all of which documents shall be in form and
substance reasonably satisfactory to FFCA.

(x) the representations and warranties set forth in the Substitute
Documents and Section 6 of this Agreement applicable to the proposed
Substitute Premises shall be true and correct in all material respects as
of the date of substitution (with appropriate modifications consistent with
the foregoing provisions of this Section to reflect proposed Substitute
Premises subject to ground leases), and Debtor shall have delivered to FFCA
an officer's certificate certifying to that effect.

(xi) Debtor shall have delivered to FFCA certificates of insurance
and insurance policies showing that insurance required by the Substitute
Documents is in full force and effect.

Upon satisfaction of the foregoing conditions with respect to the
release of Premises:

24
<PAGE>

(a) the proposed Substitute Premises shall be deemed substituted for
the Premises to be replaced;

(b) the Loan Amount for the Substitute Premises shall be the same as
for the replaced Premises;

(c) the Substitute Premises shall be referred to herein as a
"Premises" and included within the definition of "Premises" and shall
secure the same Obligations (as defined in the Mortgage) as were secured by
the Premises that were replaced;

(d) the Substitute Documents shall be dated as of the date of the
substitution; and

(e) FFCA will release, or cause to be released, the lien of the
Mortgage, UCC Financing Statements and any other Loan Documents encumbering
the replaced Premises.

14. Miscellaneous Provisions.

A. Notices. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this
Agreement shall be in writing and given by (i) hand delivery, (ii)
facsimile, (iii) express overnight delivery service or (iv) certified or
registered mail, return receipt requested, and shall be deemed to have been
delivered upon (a) receipt, if hand delivered, (b) transmission, if
delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day
of deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:

If to Debtor: Mr. Charles L. Dunlap
Chief Executive Officer and President
Precision Auto Care, Inc.
748 Miller Drive, SE
Leesburg, VA 20175
Telephone: (703) 777-9095
Telecopy: (703) 771-7108

If to FFCA: Dennis L. Ruben, Esq.
Executive Vice President and General Counsel
FFCA Acquisition Corporation
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226

B. Real Estate Commission. FFCA and Debtor represent and warrant to
each other that they have dealt with no real estate or mortgage broker,
agent, finder or other intermediary in connection with the transactions
contemplated by this Agreement. FFCA

25
<PAGE>

and Debtor shall indemnify and hold each other harmless from and against
any costs, claims or expenses, including attorneys' fees, arising out of
the breach of their respective representations and warranties contained
within this Section.

C. Waiver and Amendment. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument unambiguously
setting forth the matter waived or amended and signed by the party against
which enforcement of such waiver or amendment is sought. Waiver of any
matter shall not be deemed a waiver of the same or any other matter on any
future occasion.

D. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any manner in
the construction or interpretation hereof.

E. FFCA's Liability. Notwithstanding anything to the contrary
provided in this Agreement, it is specifically understood and agreed, such
agreement being a primary consideration for the execution of this Agreement
by FFCA, that (i) there shall be absolutely no personal liability on the
part of any shareholder, director, officer or employee of FFCA, with
respect to any of the terms, covenants and conditions of this Agreement or
the other Loan Documents, (ii) Debtor waives all claims, demands and causes
of action against FFCA's officers, directors, employees and agents in the
event of any breach by FFCA of any of the terms, covenants and conditions
of this Agreement or the other Loan Documents to be performed by FFCA and
(iii) Debtor shall look solely to the assets of FFCA for the satisfaction
of each and every remedy of Debtor in the event of any breach by FFCA of
any of the terms, covenants and conditions of this Agreement or the other
Loan Documents to be performed by FFCA, such exculpation of liability to be
absolute and without any exception whatsoever.

F. Severability. The provisions of this Agreement shall be deemed
severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provision shall be reformed by such court so as to give maximum legal
effect to the intention of the parties as expressed therein.

G. Construction Generally. This is an agreement between parties who
are experienced in sophisticated and complex matters similar to the
transaction contemplated by this Agreement and is entered into by both
parties in reliance upon the economic and legal bargains contained herein
and shall be interpreted and construed in a fair and impartial manner
without regard to such factors as the party which prepared the instrument,
the relative bargaining powers of the parties or the domicile of any party.
Debtor and FFCA were each represented by legal counsel competent in
advising them of their obligations and liabilities hereunder.

H. Other Documents. Each of the parties agrees to sign such other
and further documents as may be appropriate to carry out the intentions
expressed in this Agreement.

I. Attorneys' Fees. In the event of any judicial or other
adversarial proceeding between the parties concerning this Agreement, the
prevailing party shall be entitled to

26
<PAGE>

recover its attorneys' fees and other costs in addition to any other relief
to which it may be entitled. References in this Agreement to the attorneys'
fees and/or costs of FFCA shall mean both the fees and costs of independent
outside counsel retained by FFCA with respect to this transaction and the
fees and costs of FFCA's in-house counsel incurred in connection with this
transaction.

J. Entire Agreement. This Agreement and the other Loan Documents,
together with any other certificates, instruments or agreements to be
delivered in connection therewith, constitute the entire agreement between
the parties with respect to the subject matter hereof, and there are no
other representations, warranties or agreements, written or oral, between
Debtor and FFCA with respect to the subject matter of this Agreement.
Notwithstanding anything in this Agreement to the contrary, upon the
execution and delivery of this Agreement by Debtor and FFCA, the Commitment
shall be deemed null and void and of no further force and effect and the
terms and conditions of this Agreement shall control notwithstanding that
such terms may be inconsistent with or vary from those set forth in the
Commitment.

K. Forum Selection; Jurisdiction; Venue; Choice of Law. Debtor
acknowledges that this Agreement was substantially negotiated in the State
of Arizona, the Agreement was signed by FFCA in the State of Arizona and
delivered by Debtor in the State of Arizona, all payments under the Notes
will be delivered in the State of Arizona and there are substantial
contacts between the parties and the transactions contemplated herein and
the State of Arizona. For purposes of any action or proceeding arising out
of this Agreement, the parties hereto hereby expressly submit to the
jurisdiction of all federal and state courts located in the State of
Arizona and Debtor consents that it may be served with any process or paper
by registered mail or by personal service within or without the State of
Arizona in accordance with applicable law. Furthermore, Debtor waives and
agrees not to assert in any such action, suit or proceeding that it is not
personally subject to the jurisdiction of such courts, that the action,
suit or proceeding is brought in an inconvenient forum or that venue of the
action, suit or proceeding is improper. It is the intent of the parties
hereto that all provisions of this Agreement shall be governed by and
construed under the laws of the State of Arizona, without giving effect to
its principles of conflicts of law. To the extent that a court of
competent jurisdiction finds Arizona law inapplicable with respect to any
provisions hereof, then, as to those provisions only, the laws of the
states where the Premises are located shall be deemed to apply. Nothing in
this Section shall limit or restrict the right of FFCA to commence any
proceeding in the federal or state courts located in the states in which
the Premises are located to the extent FFCA deems such proceeding necessary
or advisable to exercise remedies available under this Agreement or the
other Loan Documents.

L. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.

M. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Debtor and FFCA and their respective successors and
permitted assigns, including, without limitation, any United States
trustee, any debtor in possession or any trustee appointed from a private
panel.

27
<PAGE>

N. Survival. Except for the conditions of Closing set forth in
Section 9, which shall be satisfied or waived as of the Closing Date, all
representations, warranties, agreements, obligations and indemnities of
Debtor and FFCA set forth in this Agreement shall survive the Closing.

O. Waiver of Jury Trial and Punitive, Consequential, Special and
Indirect Damages. DEBTOR AND FFCA HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR
ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO.
THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL
BY JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT
DAMAGES FROM FFCA AND ANY OF FFCA'S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES
PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY
DEBTOR AGAINST FFCA OR ANY OF FFCA'S AFFILIATES, OFFICERS, DIRECTORS OR
EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT
OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN
OR RELATED HERETO. THE WAIVER BY DEBTOR OF ANY RIGHT IT MAY HAVE TO SEEK
PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED
BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.

P. Transfers, Participations and Securitization. (1) A material
inducement to FFCA's willingness to complete the transactions contemplated
by the Loan Documents is Debtor's agreement that FFCA may, at any time,
sell, transfer or assign any Note, Mortgage and/or any of the other Loan
Documents, and any or all servicing rights with respect thereto (each, a
"Transfer"), or grant participations in any Note, Mortgage and/or any of
the other Loan Documents (each, a "Participation"), or complete a
Securitization with respect to any Note, Mortgage and/or any of the other
Loan Documents.

(2) Debtor agrees to cooperate in good faith with FFCA in connection
with any such Transfer, Participation and/or Securitization of any Note,
Mortgage and/or any of the other Loan Documents, including, without
limitation, (i) providing such documents, financial and other data, and
other information and materials (the "Disclosures") which would typically
be required with respect to Debtor by a purchaser, transferee, assignee,
servicer, participant, investor or rating agency involved with respect to
such Transfer, Participation and/or Securitization, as applicable;
provided, however, Debtor shall not be required to make Disclosures of any
confidential information or any information which has not previously been
made public unless required by applicable federal or state securities

28
<PAGE>

laws; and (ii) amending the terms of the transactions evidenced by the Loan
Documents to the extent necessary so as to satisfy the requirements of
purchasers, transferees, assignees, servicers, participants, investors or
selected rating agencies involved in any such Transfer, Participation or
Securitization, so long as such amendments would not have a material
adverse effect upon Debtor or the transactions contemplated hereunder.

(3) Debtor consents to FFCA providing the Disclosures, as well as any
other information which FFCA may now have or hereafter acquire with respect
to the Premises or the financial condition of Debtor to each purchaser,
transferee, assignee, servicer, participant, investor or rating agency
involved with respect to such Transfer, Participation and/or
Securitization, as applicable. FFCA and Debtor (and their respective
Affiliates) shall each pay their own attorneys fees and other out-of-pocket
expenses incurred in connection with the performance of their respective
obligations under this Section.

(4) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents:

(a) a breach or default, after the passage of all applicable
notice and cure or grace periods, under the Ground Lease, Loan
Document or Other Agreement which relates to a loan or sale/leaseback
transaction which has not been the subject of a Securitization shall
not constitute an Event of Default or a breach or default, as
applicable, under any Loan Document or Other Agreement which relates
to a loan which has been the subject of a Securitization;

(b) a breach or default, after the passage of all applicable
notice and cure or grace periods, under the Ground Lease, Loan
Document or Other Agreement which relates to a loan which is included
in any Securitized Loan Pool shall not constitute an Event of Default
or a breach or default, as applicable, under any Loan Document or
Other Agreement which relates to a loan which is included in any other
Securitized Loan Pool;

(c) the Loan Documents corresponding to the Notes in any
Securitized Loan Pool shall not secure the obligations of any of the
Debtor Entities contained in any Loan Document or Other Agreement
which does not correspond to a loan in such Securitized Loan Pool; and

(d) the Loan Documents and Other Agreements which do not
correspond to a loan in any Securitized Loan Pool shall not secure the
obligations of any of the Debtor Entities contained in any Loan
Document or Other Agreement which does correspond to a loan in such
Securitized Loan Pool.

<PAGE>

IN WITNESS WHEREOF, Debtor and FFCA have entered into this Agreement as of
the date first above written.

FFCA:

FFCA ACQUISITION CORPORATION, a Delaware
corporation

By_____________________________________________
Printed Name___________________________________
Its____________________________________________

DEBTOR:

PRECISION AUTO CARE, INC., a Virginia
corporation

By_____________________________________________
Printed Name___________________________________
Its____________________________________________

30
<PAGE>

STATE OF ARIZONA )
) SS.
COUNTY OF MARICOPA )

The foregoing instrument was acknowledged before me on , 1999
by , of FFCA Acquisition Corporation, a Delaware
corporation, on behalf of the corporation.

_______________________________________________
Notary Public

My Commission Expires:

__________________________

STATE OF )
) SS.
COUNTY OF )

The foregoing instrument was acknowledged before me on , 1999
by , of Precision Auto Care, Inc. a Virginia
corporation, on behalf of the corporation.

_______________________________________________
Notary Public

__________________________
My Commission Expires:

31
<PAGE>

EXHIBIT A

DESCRIPTION OF PREMISES; ALLOCATED LOAN AMOUNT

Premises FFCA No. Loan Amount
- ----------------------------------------------- --------- -----------
8070 80th Avenue, Denver, CO 8000-8808 $450,000.00
4450 South Buckley Road, Denver, CO 8000-8809 $600,000.00
11604 West Belleview, Denver, CO 8000-8810 $400,000.00
9160 East 38th Street, Indianapolis, IN 8000-8811 $170,000.00
8150 Pendelton Pike, Indianapolis, IN 8000-8812 $772,000.00
8411 Huron Street, Denver, CO 8000-8813 $550,000.00
2110 East Livingston, Columbus, OH 8000-8814 $205,000.00
5575 Leetsdale Drive, Denver, CO 8000-8815 $425,000.00
794 State Street, Westerville, OH 8000-8816 $500,000.00
6415 Miller Street, Denver, CO 8000-8817 $564,000.00
4555 South Chambers, Denver, CO 8000-8818 $341,000.00
900 West 5th Street, Columbus, OH 8000-8819 $425,000.00
1085 South Hamilton Road, Columbus, OH 8000-8820 $125,000.00
2295 Morse Road, Columbus, OH 8000-8821 $217,000.00
1260 Barnum Avenue, Stratford, CT 8000-8823 $450,000.00
1215 South Sheridan Boulevard, Denver, CO 8000-8824 $282,000.00
3940 North High School Road, Indianapolis, IN 8000-8825 $233,000.00
4115 South Emerson, Indianapolis, IN 8000-8826 $420,000.00
1530 Kingston, Denver, CO 8000-8827 $ 75,000.00

<PAGE>

Exhibit 10.28

FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------

This First Amendment to Amended and Restated Loan and Security
Agreement ("First Amendment") is entered into this ________ day of May, 1999, by
and among PRECISION AUTO CARE, INC., a Virginia corporation ("PAC"), and certain
of its subsidiaries wholly-owned and/or controlled by it, namely, WE JAC
CORPORATION, a Delaware corporation; PRECISION BUILDING SOLUTIONS INCORPORATED,
formerly known as LUBE VENTURES, INC., a Delaware corporation; ROCKY MOUNTAIN
VENTURES, INC., a Colorado corporation; ROCKY MOUNTAIN VENTURES II, INC., a
Colorado corporation; MIRACLE PARTNERS, INC., a Delaware corporation; RALSTON
CAR WASH, LTD., a Colorado limited liability company; PREMA PROPERTIES, LTD., an
Ohio limited liability company; MIRACLE INDUSTRIES, INC., an Ohio corporation;
KBG, LLC, a Colorado limited liability company; PTW, INC., a Washington
corporation; NATIONAL 60 MINUTE TUNE, INC., a Washington corporation; HYDROSPRAY
CAR WASH EQUIPMENT CO., LTD., an Ohio limited liability company; PRECISION TUNE
AUTO CARE, INC., a Virginia corporation; WORLDWIDE DRYING SYSTEMS, INC., a
Colorado corporation; PAC MEXICAN DELAWARE HOLDING COMPANY, INC., a Delaware
corporation; PAC MEXICAN HOLDING COMPANY LLC, a Virginia limited liability
company; PRECISION AUTO CARE MEXICO II, S. de R.L. de C.V., a Mexican limited
liability company; PRECISION AUTO CARE MEXICO I, S. de R.L. de C.V., a Mexican
limited liability company; and INDY VENTURES, L.L.C., an Indiana limited
liability company (each of the foregoing and PAC are sometimes hereafter
referred to individually as a "Borrower" and collectively as the "Borrowers"),
and FIRST UNION NATIONAL BANK (the "Bank").

RECITALS
--------

1. The Borrowers are indebted to the Bank pursuant to a Third
Consolidated, Amended and Restated Revolving and Acquisition Line of Credit
Promissory Note dated as of February 1, 1999, in the face amount of
$21,072,860.62 (the "Note").

2. The Note evidences a Line of Credit and an Acquisition Line of
Credit (which is treated on the Bank's books as a series of term loans).

3. As of May 5, 1999, there was due on the Line of Credit $6,500,000 in
principal and $7,018.47 in interest, plus attorneys' fees and expenses.

4. As of May 5, 1999, the following terms loans were outstanding under
the Acquisition Line of Credit, and had the following principal and interest
balances:

a. Loan in the original amount of $467,723.60, on which principal
is $301,695.11 and interest is $324.45;

<PAGE>

b. Loan in the original amount of $2,296,000.00, on which
principal is $2,009,000.00 and interest is $2,160.51;

c. Loan in the original amount of $1,704,867.15, on which
principal is $1,495,497.50 and interest is $1,608.28;

d. Loan in the original amount of $1,552,136.57, on which
principal is $1,364,809.71 and interest is $1,467.74;

e. Loan in the original amount of $4,949,999.98, on which
principal is $4,308,333.29 and interest is $4,633.26.

5. Payment of the Note is secured by a security interest in the
personal property collateral described in an Amended and Restated Loan and
Security Agreement effective as of February 1, 1999.

6. The Borrowers have requested that the Bank modify certain terms and
provisions of the Amended and Restated Loan and Security Agreement, and the Bank
is agreeable to doing so, subject to and as evidenced by the execution of this
First Amendment. All Borrowers join in the execution hereof and the joint and
several undertakings herein to induce the Bank to make the requested
modifications to the Amended and Restated Loan and Security Agreement.

Section 1. Recitals. The parties acknowledge the accuracy of the
--------
Recitals and incorporate the Recitals into this First Amendment.

Section 2. Modifications to Amended and Restated Loan and Security
-------------------------------------------------------
Agreement. The Amended and Restated Loan and Security Agreement is amended as
- ---------
follows:

a. Maximum Loan Amount. The second sentence of Section 1.41A
-------------------
is deleted in its entirety and replaced with the following:

The Maximum Loan Amount is subject to reduction in the manner
provided in Section 2.4 hereof. From and after June 1, 1999,
the Line of Credit Portion of the Maximum Loan Amount shall be
Four Million Six Hundred Thousand Dollars ($4,600,000), and
from and after July 31, 1999, the Line of Credit Portion of
the Maximum Loan Amount shall be Four Million One Hundred
Fifty Thousand Dollars ($4,150,000).

b. Repayment of the Acquisition Line of Credit. In Section
-------------------------------------------
2.2.6, the date "April 25, 1999" is changed to "June 1, 1999".

-2-
<PAGE>

c. Columbus Sale Transaction. Section 2.4(e) is deleted in its
-------------------------
entirety and replaced with the following:

On or before June 1, 1999, the Borrowers shall close on the
Columbus Sale Transaction. Contemporaneously with closing, the
Borrowers shall pay to the Bank all Net Sale Proceeds of the
Columbus Sale Transaction or $1,400,000, whichever is greater,
which the Bank shall apply to permanently reduce the Line of
Credit.

d. FFCA Financing. Section 2.4(f) is deleted in its entirety
--------------
and replaced with the following:

On or before June 1, 1999, the Borrowers shall obtain at least
$6,900,000 in Net Mortgage Proceeds from the FFCA Financing of
the Borrowers' real property located at

8070 West 80th Avenue
Arvada, Colorado 80005

4450 South Buckley Road
Aurora, Colorado 80015

11604 West Belleview
Littleton, Colorado 80127

5575 Leetsdale Drive
Denver, Colorado 80222

1215 South Sheridan Boulevard
Lakewood, Colorado 80226

4555 South Chambers Road
Aurora, Colorado 80015

1530 Kingston Street
Aurora, Colorado 80010

8411 North Huron Street
Federal Heights, Colorado 80221

-3-
<PAGE>

6415 Miller Street
Arvada, Colorado 80004

9160 East 38th Street
Indianapolis, Indiana 46236

8150 Pendleton Pike
Lawrence, Indiana 46226

4115 South Emerson Avenue
Indianapolis, Indiana 46203

1260 Barnum Avenue
Stratford, Connecticut 06497

3940 North High School Road
Indianapolis, Indiana 46254

2110 East Livingston
Columbus, Ohio 43209

794 South State Street
Westerville, Ohio 43081

900 West 5th Avenue
Columbus, Ohio 43212

2295 Morse Road
Columbus, Ohio 43229

1085 South Hamilton Road
Columbus, Ohio 43227

Contemporaneously with closing, the Borrowers shall pay
$5,500,000 of these Net Mortgage Loan Proceeds to the Bank,
$5,000,000 of which the Bank shall apply against whichever
term loans under the Acquisition Line of Credit the Bank
chooses, and the remaining $500,000 of which the Bank shall
apply to permanently reduce the Line of Credit. Provided that
the Borrowers have made all required payments to the Bank in a
timely manner, and are not otherwise in default under this
Agreement, the Borrowers may use the remaining Net Mortgage
Loan Proceeds to satisfy in part the $5,000,000 Subordinated
Debt.

e. Permanent Reduction in Line of Credit. Section 2.4(g) is
-------------------------------------
changed to read as follows:

-4-
<PAGE>

By June 1, 1999, the Borrowers shall have permanently reduced
the Line of Credit to $4,600,000 or less. By July 31, 1999,
the Borrowers shall have permanently reduced the Line of
Credit to $4,150,000 or less.

f. Marion, Indiana Sale. A new Section 2.4(h) is added to the
--------------------
agreement as follows:

On or before July 31, 1999, the Borrowers shall close on the
sale of the real property located at 950 South Baldwin Street,
Marion, Indiana, and shall pay at closing to the Bank the
greater of the Net Sale Proceeds or $450,000, which the Bank
shall apply to permanently reduce the Line of Credit.

g. Real Estate. The first sentence of Section 3.4 is deleted
-----------
in its entirety and replaced by the following:

The Bank reserves the right to secure (subject to any
Permitted Liens) the Loans and Obligations by Deeds of Trust
or mortgages on any real estate, or interests in real estate,
now or hereafter owned by PAC or the Borrowers, except for the
real property subject to the FFCA Financing and the Heartland
Bank Financing.

h. Total Funded Debt/Annualized EBITDA Ratio. Section 6.17 is
-----------------------------------------
deleted in its entirety and replaced with the following:

On or before July 31, 1999, the Borrowers shall provide in
writing to the Bank their Total Funded Debt/Annualized EBITDA
Ratio, on a consolidated basis, as of the end of the fiscal
quarter ending June 30, 1999.

i. Consolidated Liabilities to Tangible Net Worth Ratio.
----------------------------------------------------
Section 6.18 is deleted in its entirety and replaced with the following:

On or before July 31, 1999, the Borrowers shall provide in
writing to the Bank their Ratio of Consolidated Liabilities to
Consolidated Tangible Net Worth as of the end of the fiscal
quarter ending June 30, 1999.

j. Annualized EBITDAR. Section 6.19 is deleted in its entirety
------------------
and replaced with the following:

On or before July 31, 1999, the Borrowers shall provide in
writing to the Bank their Ratio (on a consolidated basis) (a)
Annualized EBITDAR to (b) interest expense, plus Rent Expense,
plus current maturities of long-term indebtedness and Leases,
as of the end of the fiscal quarter ending June 30, 1999.

-5-
<PAGE>

k. Permitted Sales and Financings. Section 6.22 is deleted in
------------------------------
its entirety and replaced with the following:

With respect to any sales or financings described in the
Recitals above and notwithstanding any other provision of this
Agreement, the Bank's consent to any sale or financing is
conditional upon the following:

a. First Union's receipt, in connection with each sale/
financing, of a loan commitment letter, a sale agreement(s),
financing documents (promissory note, security agreement and
mortgage), a settlement statement, appraisal information and a
list of the payables which are being paid from the proceeds
available for that use;

b. At a minimum, First Union's receipt, at least three
business days before closing on the transaction, of copies of
the sale agreement(s) or the loan commitment letter, and the
settlement statement with respect to the sale or financing
transaction.

c. PAC making a best effort's attempt to deliver to First
Union before closing copies of the financing documents,
appraisal information with respect to the real property which
is being sold or financed, and a list of the payables which are
being paid from the proceeds available for that use. In any
event, PAC must deliver these items to the Bank as promptly as
possible after the closing.

Section 3. Other Terms. Except as specifically modified herein, all
-----------
other terms and conditions of the Amended and Restated Loan and Security
Agreement, the Note and all other documents evidencing, securing or otherwise
documenting the terms and provisions of the Line of Credit and the Acquisition
Line of Credit remain in full force and effect and are hereby ratified and
confirmed. The modifications contained herein shall not constitute a novation of
the Borrowers' obligations under the Line of Credit or the Acquisition Line of
Credit.

Section 4. Representations. The Borrowers represent, warrant and agree
---------------
that (i) there are no claims, defenses or setoffs with respect to the Note, or
with respect to the indebtedness evidenced by the Note or secured by the
collateral described in the Amended and Restated Loan and Security Agreement, or
with respect to the collection or enforcement of any of the same; (ii) to the
best of the Borrowers' knowledge, information and belief, except as cured by
this First Amendment, no event of default has occurred and is continuing under
the Note or the Amended and Restated Loan and Security Agreement; and (iii) the
Bank has made no representations or commitments, oral or written, or undertaken
any obligations other than as expressly set forth in this First Amendment.

Section 5. Release. To induce the Bank to enter into this First
-------
Amendment, the Borrowers release, remise, acquit and forever discharge the Bank
and each of its employees, agent, directors, officers, attorneys, successors and
assigns from any and all matters or claims, actions, causes of action, suits,
debts, agreements, and demands whatsoever whether known or

-6-
<PAGE>

unknown, in law or in equity, or otherwise, which the Borrowers ever had, now
have, or shall have against the Bank or any of the parties described above by
reason of any act, cause, matter or thing whatsoever existing or done from the
beginning of time to the date of this First Amendment.

Section 6. Amendments. No amendment of this First Amendment and no
----------
waiver of any one or more of the provisions hereof shall be effective unless set
forth in writing and signed by the parties hereto.

Section 7. Binding Nature. This First Amendment shall be binding and
--------------
inure to the benefit of the parties hereto and their respective successors and
assigns.

Section 8. Choice of Law. This First Amendment shall be governed by,
-------------
and enforced pursuant to, the internal laws of the State of Maryland, and the
parties hereto consent to the jurisdiction and venue of the Circuit Court of any
county in the State of Maryland, the Circuit Court for the City of Baltimore in
the State of Maryland, or the United States District Court for the District of
Maryland.

Section 9. Waiver of Jury Trial. Each party to this First Amendment
--------------------
agrees that any suit, action or proceeding, whether claim or counterclaim
brought or instituted by any party hereto or any successor or assign of any
party, on or with respect to this First Amendment or which in any way relates to
the Line of Credit or the Acquisition Line of Credit, shall be tried only by a
court and not by a jury. Each party hereby expressly waives any right to a trial
by jury in any such suit, action or proceeding.

IN WITNESS WHEREOF, the Borrowers and the Bank have executed this First
Amendment with the specific intention of creating a document under seal as of
the date and year first above stated.

WITNESS/ATTEST: FIRST UNION NATIONAL BANK

______________________________ By: _______________________(SEAL)
John G. Dumm
Vice President

PRECISION AUTO CARE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-7-
<PAGE>

WE JAC CORPORATION

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PRECISION BUILDING SOLUTIONS
INCORPORATED, formerly known as
LUBE VENTURES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

ROCKY MOUNTAIN VENTURES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

ROCKY MOUNTAIN VENTURES II, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

MIRACLE PARTNERS, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-8-
<PAGE>

RALSTON CAR WASH, LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Manager

PREMA PROPERTIES, LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
General Manager

MIRACLE INDUSTRIES, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

KBG, LLC

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Manager

PTW, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-9-
<PAGE>

NATIONAL 60 MINUTE TUNE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

HYDRO-SPRAY CAR WASH EQUIPMENT CO., LTD.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
Authorized Member

PRECISION TUNE AUTO CARE, INC.

______________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

WORLDWIDE DRYING SYSTEMS, INC.

_____________________________ By: ________________________(SEAL)
Charles L. Dunlap
President and CEO

PAC MEXICAN DELAWARE HOLDING COMPANY, INC.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

-10-
<PAGE>

PAC MEXICAN HOLDING COMPANY, LLC

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President

PRECISION AUTO CARE MEXICO II,
S. de R.L. de C.V.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

PRECISION AUTO CARE MEXICO I,
S. de R.L. de C.V.

____________________________ By: _______________________(SEAL)
Charles L. Dunlap
President and CEO

INDY VENTURES, L.L.C.

___________________________ By: ______________________(SEAL)
Charles L. Dunlap
Manager

-11-
<PAGE>

STATE OF VIRGINIA, CITY/COUNTY OF ____________, to wit:

I HEREBY CERTIFY that on this __ day of May, 1999, before me, the
undersigned Notary Public, personally appeared John G. Dumm, who acknowledged
himself to be a Vice President of First Union National Bank, known to me (or
satisfactorily proved) to be the person who executed the foregoing First
Amendment to Amended and Restated Loan and Security Agreement and acknowledged
that he, being authorized so to do, executed the same for the purposes therein
contained as the duly authorized Vice President of First Union National Bank, by
signing the name of First Union National Bank by himself as Vice President.

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

--------------------------
Notary Public

My Commission Expires:

- -----------------------

-12-
<PAGE>

STATE OF ______________, CITY/COUNTY OF ________________, to wit:

I HEREBY CERTIFY that on this __________ day of May, 1999, before
me, the undersigned, a Notary Public of the State of aforesaid, personally
appeared Charles L. Dunlap, who acknowledged himself to be the President, Chief
Executive Officer of Precision Auto Care, Inc., a Virginia corporation; WE JAC
Corporation, a Delaware corporation; Precision Building Solutions, Incorporated,
formerly known as Lube Ventures, Inc., a Delaware corporation; Rocky Mountain
Ventures, Inc., a Colorado corporation, Rocky Mountain Ventures II, Inc., a
Colorado corporation, Miracle Partners, Inc., a Delaware corporation; Miracle
Industries, Inc., an Ohio corporation; PTW, Inc., a Washington corporation;
National 60 Minute Tune, Inc. a Washington corporation; Precision Tune Auto
Care, Inc. a Virginia corporation; Worldwide Drying Systems, Inc., a Colorado
corporation, PAC Mexican Delaware Holding Company, Inc., a Delaware corporation;
and the Manager of Ralston Car Wash, Ltd., a Colorado limited liability company,
the General Manager of Prema Properties, Ltd., an Ohio limited KBG, LLC, a
Colorado limited liability company, and Indy Ventures, L.L.C., an Indiana
limited liability company; the General Manager of Prema Properties, Ltd., an
Ohio limited liability company; the Authorized Member of Hydro-Spray Car Wash
Equipment Co., Ltd., an Ohio limited liability company; the President of PAC
Mexican Holding Company LLC, a Virginia limited liability company; the President
and General Manager of Precision Auto Care Mexico II, S. de R.L. de C.V., a
Mexican limited liability company; and Precision Auto Care Mexico I, S. de R.L.
de C.V., a Mexican limited liability company; and Precision Auto Care Mexico I,
S. de R.L. de C.V., a Mexican limited liability company; and that he, as such
President, Chief Executive Officer, General Manager, Authorized Member, Manager
and President and General Manager (as applicable, being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of each of the corporations and limited liability companies by himself
as President, Chief Executive Officer, General Manager, Authorized Member,
Manager and General manager (as applicable).

IN WITNESS WHEREOF, I hereunto set my hand and official seal.

-------------------------
Notary Public

My Commission Expires:

- -------------------------

-13-

<PAGE>

Ex1.6 Exhibit 10.29

June 1, 1999

Mr. Jerry Little
12101 Wolf Valley Drive
Clifton, VA 21024
Re: Employment Agreement

Dear Jerry:

It is my pleasure to welcome you to Precision Auto Care, Inc. ("PACI" or the
"Company") and to extend this formal offer of employment. You will assume the
role of Senior Vice President and Chief Financial Officer. Your employment with
PACI will commence June 1, 1999, and you will be compensated at an monthly rate
of $20,000 per month. As a full-time associate of PACI, you are eligible to
participate in the bonus plans of the Company and shall be able to participate
in retirement, group insurance, medical, dental, vacation and any other programs
available to executive employees of the Company. While you are permitted to
retain your relationships with other companies, you agree to devote a
substantial portion of your time to the Company.

Pursuant to the terms of the Company's existing Stock Option Plan, a copy is
attached hereto, you shall be granted non-qualified stock options to purchase
35,000 shares of common stock of the Company. Subject to the terms and
conditions of the Stock Option Plan, the grant date shall be June 1, 1999, at
the closing price set for the Company's common stock on the NASDAQ National
Market. The vesting schedule shall be contingent upon 17,500 shares vesting
upon completion of the fiscal year end audit and filing of the 10K for the
period ending June 30, 1999. The balance of 17,500 shares shall vest upon
satisfactory completion of the installation of the Platinum system for all of
the Company's principal business units. Ernst & Young will render an opinion as
to the successful completion of the Platinum installation.

The Company agrees to reimburse you for any and all reasonable expenses incurred
in discharging your responsibilities as Chief Financial Officer. Either party
may terminate this employment agreement by tendering 90 day notice; provided,
however, that the employee shall be entitled to retain any vested options.

We are excited that you will become a part of the Precision Auto Care team.

Sincerely,

Charles L. Dunlap
President and
Chief Executive Officer
Attachment

cc: Lynn Caruthers (w/o attachs)
Pam Mazza (w/o attachs)

<PAGE>

EXHIBIT 21

PRECISION AUTO CARE, INC. SUBSIDIARIES

<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
<S> <C>
Hydro Spray Car Wash Equipment Co., Ltd. Iowa
Indy Ventures L.L.C. Indiana
KBG, LLC Colorado
Miracle Industries, Inc. Ohio
Miracle Partners, Inc. Delaware
National 60 Minute Tune, Inc. Washington
PAC Acquisition LLC Virginia
PAC Mexican Delaware Holding Company, Inc. Delaware
PAC Mexican Holding Company LLC Virginia
Praxis Afinaciones Puerto Rico, Inc. Puerto Rico
Praxis Afinaciones, S.A. de C.V. Mexico
Praxis AutoPartes, S.A. de C.V. Mexico
Precision Auto Care Mexico I, S. de R.L. de C.V. Mexico
Precision Auto Care Mexico II, S. de R.L. de C.V. Mexico
Precision Building Solutions Incorporated Delaware
Precision Tune Auto Care, Inc. Virginia
Prema Properties Ltd. Ohio
Premier Accesorios, S.A. de C.V. Mexico
Promotora de Franquicias Praxis S.A. de C.V. Mexico
PTW, Inc. Washington
Ralston Car Wash, Ltd. Colorado
Rocky Mountain Ventures II, Inc. Colorado
Rocky Mountain Ventures, Inc. Colorado
Sixar Afinaciones Puerto Rico, Inc. Puerto Rico
Sixar Afinaciones, S.A. de C.V. Mexico
Sixar Guadalajara, S.A. de C.V. Mexico
Sixar Occidente, S.A. de C.V. Mexico
WE JAC Corporation Delaware
Worldwide Drying Systems, Inc. Colorado
</TABLE>

<PAGE>

POWER OF ATTORNEY

We, the undersigned Directors and Officers of Precision Auto Care, Inc. (the
"Corporation"). hereby constitute and appoint Eliot g. Bowytz, our true and
lawful attorney-in-fact with full power to sign for us, in our names and in the
capacities indicated below, the Corporation's Annual Report on Form 10-K for the
year ended June 30, 1999, and any and all amendments thereto.

Name Title Date

/s/ Charles Dunlap 9/27/99
- ---------------------------- --------------
Charles Dunlap Officer Director
(Principal, Executive Officer)

/s/ Jerry Little 9/22/99
- ---------------------------- --------------
Jerry Little, Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting Officer)

/s/ Lynn E. Caruthers 9/22/99
- ---------------------------- --------------
Lynn E. Caruthers, Chairperson of the
Board of Directors, Director

/s/ Woodley A. Allen 9/22/99
- ---------------------------- --------------
Woodley A. Allen Director

/s/ George Bavelis 9/22/99
- ---------------------------- --------------
George Bavelis Director

/s/ Bernard H. Clineburg 9/23/99
- ---------------------------- --------------
Bernard H. Clineburg Director

/s/ Effie Eliopulos 9/22/99
- ---------------------------- --------------
Effie Eliopulos Director

/s/ Bassam N. Ibrahim 9/22/99
- ---------------------------- --------------
Bassam N. Ibrahim Director

/s/ Richard O. Johnson 9/22/99
- ---------------------------- --------------
Richard O. Johnson Director

/s/ Arthur Kellar 9/22/99
- ---------------------------- --------------
Arthur Kellar Director

/s/ Harry G. Pappas, Jr. 9/22/99
- ---------------------------- --------------
Harry G. Pappas, Jr. Director

/s/ William R. Klumb 9/22/99
- ---------------------------- --------------
William R. Klumb Director

/s/ Gerald Zamensky 9/22/99
- ---------------------------- --------------
Gerald Zamensky Director