<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;

          (c) unsecured trade indebtedness incurred in the ordinary course of
business;

          (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-