<PAGE>

                      LOAN RENEWAL AND SECURITY AGREEMENT
                      -----------------------------------


          THIS LOAN RENEWAL 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 PRECISION FUNDING, L.L.C.,
a Virginia limited liability company (the "Lender").


                                   Recitals
                                   --------

          A.  The Borrowers are indebted to the Lender under a Third
Consolidated, Amended and Restated Revolving and Acquisition Line of Credit
Promissory Note dated October 1, 1998 in the face amount of $21,072,860.62
(together with allonges thereto, the "Note"), acquired by Lender from First
Union National Bank.

          B.  The Note evidences, inter alia, a Line of Credit, and an
Acquisition Line of Credit, both of which are governed and secured by a Second
Amended and Restated Loan and Security Agreement dated October 27, 1999, as
modified by a Modification Agreement dated May 15, 2000.

          C.  As of September 29, 2000, there was due under the Note
$5,836,666.57 in principal, $53,720.84 in interest, and $17,109.07 in attorneys
fees.

          D.  As of September 29, 2000, the Borrowers were further indebted to
Arthur C. Kellar and Desarollo Integrado, S.A. de C.V., respectively, in the
principal amount of up to
<PAGE>

$2,500,000, plus interest, as evidenced by two notes (the "Subordinated Notes")
dated August 4, 2000.

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

          F.  Because of the ownership relation and the other relationships
described hereafter, the Borrowers requested the Lender to provide, and the
Lender did provide, its commitment (the "Commitment") dated September 25, 2000,
upon the terms and conditions stated therein.

          G.  Pursuant to the Commitment, the Lender has, subject to the
conditions therein specified, agreed to provide a credit facility.

              1.    to purchase the Note and the Subordinated Notes, in each
                    case for the amount of principal, interest, and attorneys'
                    fees due thereon at the time of purchase;
              2.    to renew the Note and the Subordinated Notes through the
                    Consolidated Renewal Note (as hereinafter defined); and
              3.    to provide an additional amount of revolving credit, as
                    contemplated by the Note and the Second Amended and Restated
                    Loan and Security Agreement, said additional amount not to
                    exceed the amount by which (a) the Maximum Loan Amount (as
                    hereinafter defined) exceeds (b) the aggregate purchase
                    price of the Note and the Subordinated Notes.

          H.  As contemplated by the Commitment, the Lender purchased the Note
on September 29, 2000, renews the Note hereunder, and intends to purchase and
renew the Subordinated Notes within five (5) business days of the Borrowers'
execution and delivery, and Lender's acceptance, of the Consolidated Renewal
Note and this Agreement;

          I.  As provided in the Commitment, upon acquisition of the
Subordinated Notes, the Lender intends to mark the Note "paid by renewal" and to
repay the Subordinated Notes whereupon (a) all amounts paid therefor shall be
deemed Advances made under the Consolidated Renewal Note effective as of October
1, 2000, and (b) the Lender shall make available additional Advances up to the
Maximum Loan Amount.

          J.  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

                                      -2-
<PAGE>

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 law and in fact, because of the existing joint and several
liability of the Borrowers under the Note and the Subordinated Notes, 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
Lender to enter into this Agreement, each Borrower promises to pay all
Obligations (as hereinafter defined) regardless of which Borrower requested
and/or received, directly or indirectly, the proceeds or benefit of any Advance
(as hereinafter defined). For purposes of this 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 Agreement. The
Advances 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 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 Lender 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 Agreement.

          K.  The Borrowers acknowledge that each has benefited from the making
of the loans evidenced by the Note and the Subordinated Notes and each will
benefit from the renewal thereof.

          L.  All Borrowers join in the execution hereof and the joint and
several undertakings herein to induce the Lender to make available the credit
facilities herein provided for.

          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:

                                      -3-
<PAGE>

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

          As used in this 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 Agreement.  Terms defined in the Uniform
Commercial Code of Virginia 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 Virginia Uniform
Commercial Code, Titles 8.1 to 8.9 of the Code of Virginia, as amended.

          Section 1.3.  Advances.  The term "Advances" shall mean funds provided
                        --------
to or for the benefit of the Borrowers, or any of them, whether by credit to
PAC's Deposit Account based on a request from PAC for borrowing as provided in
Article II herein, or by any extension of credit from Lender, regardless of
whether a specific request has been made therefor.

          Section 1.4.  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 1.5.  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 Renewal Note.

          Section 1.6.  Agreement.  The term "Agreement" shall mean this Loan
                        ---------
Renewal and Security Agreement, as amended, restated, extended or modified from
time to time, together with all attachments and exhibits hereto or thereto.

          Section 1.7.  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

                                      -4-
<PAGE>

Subsidiary, agrees to be bound by the terms of this Agreement and assumes joint
and several liability for repayment of the Consolidated Renewal Note and all
other Obligations.

          Section 1.8.  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 Lender 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 representations and warranties of the Borrowers under Sections
5.1, 5.2, 5.3, 5.4, 5.11, 5.13, 5.15, and 5.18 of this Agreement;

          (b) The affirmative covenants of the Borrowers contained in Sections
6.4, 6.6, 6.7, 6.10, 6.11, 6.12, 6.14, 6.15, 6.16, and 6.17 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 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;

          (c) 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. 1 attached hereto shall
                                            -------------
not represent a violation of the provisions of Section 7.7 of this Agreement;
and

          (d) The Events of Default under Sections 8.7, 8.8, 8.9, and 8.10 of
this Agreement.

          Section 1.9.  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 Virginia.

          Section 1.10. Collateral.  The term "Collateral" shall mean all of
                        ----------
the tangible and intangible real and personal property with respect to which the
Borrowers have granted a security interest or lien to the Lender pursuant to the
terms of this Agreement, the Second

                                      -5-
<PAGE>

Amended and Restated Loan and Security Agreement, any document to be executed in
connection with this Agreement, or any of the other Loan Documents.

          Section 1.11.  Consolidated Renewal Note.  The term "Consolidated
                         -------------------------
Renewal Note" shall mean the promissory note dated and effective September 29,
2000, executed by the Borrowers as obligors, in the original maximum principal
amount of Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) and
payable to the order of the Lender, and any and all substitutions, extensions,
renewals, amendments, restatements, modifications or replacements thereof.

          Section 1.12.  Deposit Account.  The term "Deposit Account" shall mean
                         ---------------
PAC's operating account(s) established and maintained with the Depository 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 1.13.  Depository Bank.  The term "Depository Bank" shall mean
                         ---------------
________________, or such other banking institution at which PAC maintains its
Deposit Accounts.

          Section 1.14.  EBITDA.  The term "EBITDA" shall mean for any fiscal
                         ------
period the consolidated earnings of PAC and its Subsidiaries before interest,
taxes, depreciation and amortization for such period, determined in accordance
with GAAP consistently applied.

          Section 1.15.  EBITDA RATIO.  The term "EBITDA RATIO" shall mean at
                         ------------
any determination date the ratio of (a) the sum of (i) aggregate EBITDA for the
four consecutive fiscal quarters ending on such date, plus (ii) cash of PAC and
its Subsidiaries held in banks at such date, to (b) the sum of (i) principal
payments due on the Consolidated Renewal Note and all other Indebtedness of PAC
and its subsidiaries during the two consecutive fiscal quarters next following
such date, plus (ii) all interest, if any, accrued on the Consolidated Renewal
Note and such Indebtedness and unpaid at such date, plus (iii) interest on the
Consolidated Note and such Indebtedness payable by PAC and its Subsidiaries
during the two consecutive fiscal quarters next following such date .

          Section 1.16.  ERISA.  The term "ERISA" shall mean the Employee
                         -----
Retirement Income Security Act of 1974, as amended, and all regulations or
rulings promulgated thereunder.

          Section 1.17.  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 1.18.  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 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.

                                      -6-
<PAGE>

          Section 1.19.  Indebtedness.  The term "Indebtedness " shall mean the
                         ------------
total obligation owed to any Person by PAC or its Subsidiaries for borrowed
funds, including the amount of capitalized lease obligations required by GAAP to
be stated as balance sheet liabilities.

          Section 1.20.  Interest Rate.  The term "Interest Rate" shall mean a
                         -------------
rate of interest of twelve per cent (12%) per annum.

          Section  1.21. 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 1.22.  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 Lender (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 Lender'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.

          Section 1.23.  Loan.  The term "Loan" or "Loans" shall mean all
                         ----
Advances, readvances and other credit accommodations provided under this
Agreement for (a) acquisition of the Note and the Subordinated Notes, and (b)
ordinary course working capital purposes, as evidenced by the Consolidated
Renewal Note, made from time to time in accordance with the terms of this
Agreement, including future Advances and readvances, whether now existing or
hereafter arising.

          Section 1.24.  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 Consolidated Renewal Note, the Trademark
Assignment, the Pledge Agreement, appropriate financing statements and
continuation statements, mortgages and deeds of trust, and any amendments,
extensions or modifications thereof or thereto.

          Section 1.25.  Material Adverse Effect.  The term "Material Adverse
                         -----------------------
Effect" shall mean, in the good faith opinion of the Lender, and subject to any
applicable cure or grace periods, a material adverse effect upon 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 Lender granted under the Loan Documents or the rights and remedies of the
Lender under the Loan Documents; or (e) the condition or value of any material
portion of the Collateral.

                                      -7-
<PAGE>

          Section 1.26.  Maturity.  The term "Maturity" shall mean October 1,
                         --------
2003, the date on which the Loan and Obligations, all accrued interest, and all
other fees, costs and expenses provided for herein, in the Consolidated Renewal
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 Renewal
Note.

          Section 1.27.  Maximum Loan Amount.  The term "Maximum Loan Amount"
                         -------------------
shall mean the principal sum of Eleven Million Two Hundred Fifty Thousand
Dollars ($11,250,000), subject to reduction in the manner provided in Section
2.2 hereof.

          Section 1.28.  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 Borrower's assets, minus the reasonable and
customary transaction costs payable by the Borrower in connection with the
closing thereof.

          Section 1.29.  Obligations.  The terms "Obligation" or "Obligations"
                         -----------
shall mean any joint, several, or joint and several obligation of payment or
performance by the Borrowers or any of them owing to the Lender, including: (a)
the Loan any and all sums due to the Lender under the terms of this Agreement,
the Consolidated Renewal Note, and the other Loan Documents; (b) any and all
sums advanced by the Lender to preserve or protect the Collateral and the value
of the Collateral or to preserve, protect, or perfect the Lender'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 Lender of the Lender'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; (e) any other indebtedness or
liability of the Borrowers to the Lender, whether direct or indirect, joint or
several, absolute or contingent, now existing or hereafter arising; and (f) the
performance of PAC's obligations under those certain Warrants issued to Arthur
C. Kellar and Desarollo Integrado, S.A. de C.V., which Warrants were issued
pursuant to the Commitment in respect of that certain letter of August 3, 2000,
that was superseded by the Commitment referred to in the Recitals hereto and is
implemented by this Agreement.

          Section 1.30.  Permitted Liens.  The term "Permitted Liens" shall mean
                         ---------------
(a) liens or security interests in favor of the Lender; (b) existing liens
described in Exhibit No. 2 attached hereto and incorporated herein by this
             -------------
reference (including the "Grimaud Lien" as identified in Exhibit No. 2); (c)
                                                         -------------
liens arising or created in the future with the prior written consent of the
Lender 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, and (ii) are consented to by Lender.  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

                                      -8-
<PAGE>

appropriate proceedings, provided that all such liens in the aggregate have no
Material Adverse Effect and, if reasonably requested by the Lender, PAC or such
Subsidiary has established reserves reasonably satisfactory to the Lender 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 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 1.31.  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 Lender as assignee of First National Union Bank,
and any renewals or restatements thereof.

          Section 1.32.  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 1.33.  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.

                                      -9-
<PAGE>

          Section 1.34.  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 1.35.  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 1.36.  Subordinated Debt.  The term "Subordinated Debt" shall
                         -----------------
mean any and all indebtedness and liabilities of PAC or any other Borrower which
(a) 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 Lender, (b)
has been incurred pursuant to written agreements in form and substance
acceptable to the Lender and, if required by the Lender, such covenants of any
of the Borrowers contained therein have been incorporated herein as the Lender
may require, and (c) is not evidenced by the Subordinated Notes.

          Section 1.37.  Subordinated Notes.  The term "Subordinated Notes"
                         ------------------
refers to those certain notes dated August 4, 2000, payable to Arthur C. Kellar
and Desarollo Integrado, S.A. de C.V., respectively.

          Section 1.38.  Trademark Assignment.  The term "Trademark Assignment"
                         --------------------
shall mean any of the Trademark Assignments executed, delivered and acknowledged
by PAC and other Subsidiaries, in favor of the Lender as assignee of First Union
National Bank, such registered trademarks identified therein, and any renewals
or restatements thereof.  All such Trademark Assignments shall be in form
suitable for recordation in the United States Patent and Trademark Office.


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

          Section 2.1.  The Loan.  The Lender agrees to make Advances to PAC
                        --------
(including the purchase prices for the Note and the Subordinated Notes) during
the term of this Agreement in an amount not to exceed at any one time the
Maximum Loan Amount.  The obligation of the Borrowers to repay the Advances
under the Loan shall be evidenced by the Consolidated Renewal Note.  Subject to
the limitations provided herein, and so long as no Event of Default has occurred
or is continuing, the Borrowers may borrow, repay and reborrow Advances under
the Consolidated Renewal Note.

          Section 2.1.1.  Purpose of the Loan.  Advances under the Loan shall
                          -------------------
first be used to renew and extend the Note and to acquire, renew, and extend the
Subordinated Notes.

                                      -10-
<PAGE>

Thereafter, the Borrowers may use the proceeds of the Loan, up to the Maximum
Loan Amount, for general working capital needs and for the financing of capital
expenditures.

          Section 2.1.2.  Interest Rate.  The Loan shall bear interest at the
                          -------------
Interest Rate.  Interest shall be calculated based upon a year of 360 days and
the actual number of days elapsed. The Loan shall be evidenced by, and shall be
repaid with interest in accordance with, the provisions of the Consolidated
Renewal Note, the terms and conditions of which are incorporated herein by
reference.  The date and amount of each Advance made by the Lender (including
the purchase prices for the Note and the Subordinated Notes) and each payment
made by the Borrowers shall be recorded by the Lender on its books, but any
failure to record such dates or amounts shall not relieve the Borrowers of their
obligation of repayment hereunder or under the Consolidated Renewal Note.

          Section 2.1.3.  Limitation on Borrowings.  Notwithstanding anything to
                          ------------------------
the contrary contained herein, the Borrowers shall not allow the outstanding
principal balance advanced under the Consolidated Renewal Note to exceed the
Maximum Loan Amount at any one time.

          Section 2.1.4.  Repayment of the Loan.  The Borrowers shall pay
                          ---------------------
accrued interest on the outstanding principal balance of the Loan annually on
each anniversary of the Consolidated Renewal Note, commencing September 29,
2001.  The Borrowers promise to pay to the order of the Lender all principal,
accrued interest, and other costs and expenses arising under the Loan, this
Agreement and all other Obligations, at Maturity; provided, however, that (a)
the outstanding principal balance of the Loan is subject to mandatory prepayment
as further provided in Section 2.2 hereof, (b) if at any time the principal
amount outstanding under the Loan exceeds the Maximum Loan Amount, then the
Borrowers shall immediately pay over a sum equal to the amount by which such
outstanding principal exceeds the Maximum Loan Amount, 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 Loan, together with the accrued interest thereon
to the date of payment, shall be immediately due and payable at the option of
the Lender.  Interest shall be payable monthly following preparation by the
Lender of an interest statement showing interest due through the end of the
monthly payment period.

          Section 2.1.5.  Prepayment of the Loan.
                          ----------------------

                          (a)  Optional Prepayment. The Borrowers may pay or
                               -------------------
prepay the Loan in whole or in part at any time and from time to time without
penalty or additional interest. All principal payments shall be made effective
on the last day of the month in which received. The Loan 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 Lender in and
to the Collateral.

                                      -11-
<PAGE>

                        (b)  Mandatory Prepayment.  The Borrowers shall be
                             --------------------
required to prepay the Loan and to permanently reduce the Maximum Loan Amount in
accordance with the provisions of Section 2.2 hereof

          Section 2.2.  Mandatory Prepayments.  Upon sale or other disposition
                        ---------------------
of any Collateral, whether in one transaction or a series of related
transaction, having in either case a value of Twenty-Five Thousand Dollars
($25,000) or more, the Net Sale Proceeds, and an accounting therefor, shall be
delivered to Lender for application against principal on the Loan.  The Maximum
Loan Amount shall be permanently reduced upon occurrence of any such sale or
disposition of Collateral; provided, however, that this Section 2.2 shall not
                           -----------------
apply to sales of inventory, or collection or realization of Receivables, in the
ordinary course of business.


                                  ARTICLE III
                                  -----------
                             SECURITY FOR THE LOAN
                             ---------------------

         The repayment of the Loan, the satisfaction of the other Obligations,
and the full, complete and absolute performance by the Borrower of each of the
terms and conditions of this Agreement, the Consolidated Renewal Note, the other
Loan Documents and all other Obligations, direct or indirect, now or hereafter
owing to the Lender or heretofore owed to the transferor of the Note, shall be
secured by the following:

         Section 3.1.  Grant of Security Interest.  In extension and not in
                       --------------------------
limitation of their grant of security interests to the Lender, as transferee of
the Note, pursuant to the Second Amended and Restated Loan Agreement and
documents and instruments delivered from time to time in connection therewith
(which grant is hereby ratified, confirmed, and renewed), PAC and each other
Borrower hereby grant to the Lender a continuing first priority lien and
security interest (subject only to any Permitted Lien) in and to, all of 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 without limitation all
                            Receivables);
                       (b)  Inventory;
                       (c)  Chattel Paper;
                       (d)  Documents;
                       (e)  General Intangibles (including without limitation
                            trademarks, trade names, patents, copyrights and the
                            goodwill associated therewith, and all rights to
                            payments due from, and claims against, franchisees
                            of whatever nature);
                       (f)  Instruments;
                       (g)  Equipment;
                       (h)  Securities (including the capital stock of all
                            Subsidiaries); and

                                      -12-
<PAGE>

                       (i)  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 Lender all
of the Borrowers' right, title and interest in and to, and confirm and grant to
the Lender a continuing security interest in, all amounts that may be owing at
any time and from time to time by the Lender to the Borrowers in any capacity,
which security interest shall be independent of and in addition to any right of
set-off which the Lender may possess.

          Section 3.2.  Proceeds and Products.  The Lender'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 Lender 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.  Contemporaneously with the purchase of the
                        -----------
Note by Lender, First Union National Bank assigned its interests as beneficiary
of the deeds of trust or mortgages described on Exhibit No. 3 hereto.  The
                                                -------------
Borrowers shall execute and deliver to the Lender such other and further deeds
of trust or mortgages or amendments thereto as Lender shall request, in
recordable form on all real estate, or interests in real estate, now owned by
PAC or the Borrowers. Exhibit No. 3 to this Agreement sets forth a complete list
                      -------------
of all real property owned by each Borrower, and which will at all times be
encumbered by first priority deeds of trust or mortgages in favor of the Lender,
subject only to Permitted Liens.

          Section 3.5.  Future Advances.  The security interests granted by the
                        ---------------
Borrowers shall secure all current and all future Advances and all current and
future Obligations, and the Lender 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 the
                        ---------------------
grant to the Lender as assignee of First National Union Bank, and assign and
grant to the Lender, a security interest and lien upon all trademarks, trade
names, service marks, copyrights, and patents now or hereafter existing, and all
federal registrations thereof and applications for registration therefor,
including specifically, without limitation, the trademarks identified in the
Trademark Assignments.

          Section 3.7.  Landlord's Waivers.  At the request of the Lender, at
                        ------------------
any time and from time to time, PAC and/or any Borrower requested by the Lender
shall provide to the Lender appropriate landlords' waivers, in form and content
satisfactory to the Lender, for the location of PAC's or any other Borrower's
chief executive office where its or their original entry books of

                                      -13-
<PAGE>

account are maintained, and such other locations as may be determined from time
to time by the Lender, which landlords' waivers shall acknowledge the Lender'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 Lender.


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

         The Lender's obligation to make Advances under the Consolidated Renewal
Note 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 Lender at execution of this Agreement (unless otherwise stated
below) 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, which shall be delivered within five (5)
business days after execution of this Agreement;

                        (b)  A duly executed Consolidated Renewal Note;

                        (c)  Duly executed deeds of trust/mortgages/amendments
in recordable form, in compliance with Section 3.4 of this Agreement;

                        (d)  Such agreements and other documents as a title
insurance agent may require to permit the issuance of a title insurance policy
covering the deeds of trust/mortgages/amendments described above; and

                        (e)  Such other items as the Lender may reasonably
require.

          Section 4.2.  Further Documentation.  Borrowers shall promptly provide
                        ---------------------
Lender with such documents and instruments as Lender may require to evidence
perfection of the security interests herein contemplated.

          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.

                                      -14-
<PAGE>

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

          To induce the Lender to make the Loan and enter into this Agreement,
PAC represents and warrants as to the business and affairs of itself and, to its
knowledge, all Subsidiaries, each Subsidiary represents and warrants as to its
business and affairs, and all Borrowers acknowledge the Lender's justifiable
reliance upon the accuracy of, the matters set forth below, (a) as of the date
hereof and (b) as of the time of each Advance under the Loan:

          Section 5.1.  Accuracy and Completeness of Information.  All
                        ----------------------------------------
information, documents, reports, statements, financial statements, and data
submitted by or on behalf of the Borrowers 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 Lender by the Borrowers, as reflected on the attached Exhibit
                                                                       -------
No. 4, each 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 a
Borrower, violate any Laws which would impair the Collateral or the Lender's
lien and security interest therein or result in a material default under any
material Indebtedness contract, agreement, or instrument to which a Borrower is
a party or by which it or its property is bound; or (b) result in the creation
or imposition of any security interest in, or lien or encumbrance upon, any of
the assets of a Borrower, except in favor of the Lender or the holders of
Permitted Liens.

          Section 5.3.  Litigation.  Except to the extent disclosed in Exhibit
                        ----------                                     -------
No. 5 attached hereto, there is no action, suit, investigation, or proceeding
-----
pending or, to the best knowledge and belief of a Borrower, threatened against a
Borrower, which if adversely determined could reasonably be expected to have a
Material Adverse Effect on a Borrower.

          Section 5.4.  Liabilities or Adverse Changes.  No Borrower has a
                        ------------------------------
direct or contingent material liability, other than such indebtedness as is
secured by a Permitted Lien, which is known to said Borrower and not previously
disclosed to the Lender.

          Section 5.5.  Title to Collateral.  The Borrowers have 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.  The Loan Documents and the
                        --------------------
documents executed in connection with this Agreement or purchase of the Note
create in favor of the Lender 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 personal property Collateral described therein, subject only
to Permitted Liens.  To the best of the Borrowers' knowledge, the Loan Documents
and the

                                      -15-
<PAGE>

documents being executed in connection with this Agreement create in favor of
the Lender 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
real property Collateral described therein, subject only to Permitted Liens.

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

          Section 5.8.   Status.  Each 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.  Each 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.  Each Borrower has the power to
own its properties, conduct its business and affairs, and enter into the Loan
and perform the Obligations.  Each Borrower's entry into the Loan with the
Lender 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 each Borrower shown to the Lender are true, accurate, and complete and no
action has been taken in derogation or abrogation thereof.  No Borrower has
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. 6 attached hereto and incorporated herein by this reference.  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.  All financial statements
                         --------------------
submitted by the Borrowers to the Lender after the date of this Agreement shall
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.

          Section 5.10.  Validity, Binding Nature, and Enforceability of the
                         ---------------------------------------------------
Loan Documents.  The Loan Documents executed by the Borrowers are the valid and
--------------
binding obligations of each Borrower, signatory thereto, fully enforceable
against it in accordance with their terms.

          Section 5.11.  Taxes.  Each 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.  Each Borrower has no knowledge of any deficiency
or additional assessment in a

                                      -16-
<PAGE>

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 any Borrower under audit by any federal,
state or local tax authority in connection with any material tax obligations.

          Section 5.12.  ERISA.
                         -----

          (a) Exhibit No. 7 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
("Multi-employer Plan").  PAC will at the request of the Lender deliver true and
correct copies of all such Plans to the Lender.

          (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.

                                      -17-
<PAGE>

          (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 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 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 5.13.  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 5.14.  Trademarks.  Exhibit No. 8 sets forth a true and
                         ----------   --------------
complete list of all registered patents, trademarks, trade names and copyrights
owned by each Borrower, or for which applications are pending (the "Intellectual
Property").  Each of the federal registrations pertaining to the Intellectual
Property owned by any 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.  Each 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.

                                      -18-
<PAGE>

          Section 5.15.  Compliance with Laws.  Except as otherwise disclosed to
                         --------------------
the Lender, each 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.  Each 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 5.16.  Accuracy of Representations and Warranties.  No
                         ------------------------------------------
certificate or other document furnished by any 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.

          Section 5.17.  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 a 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 5.18.  Title to Assets Other Than Collateral.  Each 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
Lender, holders of Permitted Liens and lessors under true operating leases.

          Section 5.19.  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. 6 attached hereto.
                       -------------

          Section 5.20.  Additional Business Locations.  The Borrower maintains
                         -----------------------------
other business locations as set forth in Exhibit No. 6 attached hereto where
                                         --------------
Collateral is stored.

          Section 5.21.  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 Renewal 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 Renewal Note.

          Section 5.22.  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
Lender, (i) no Hazardous Substances are unlawfully stored or otherwise
unlawfully located on the business premises of

                                      -19-
<PAGE>

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 5.23.  Grimaud Lien.  PAC will perform all obligations which
                         ------------
are secured by the Grimaud Lien in a timely manner, including specifically,
without limitation, the payment of all subfranchisor fees within fourteen (14)
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 Lender in writing of any material disputes, or possible
disputes, relating to the Grimaud Lien, 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 avoid any enforcement action of the
Grimaud Lien.

          Section 5.24.  Year 2000.  All of the material computer software,
                         ---------
computer firmware, computer hardware (whether general or special purpose) and
other similar or related

                                      -20-
<PAGE>

items of automated, computerized and/or software systems(s) that are used or
relied on by PAC or any Subsidiary in the conduct of its business does not
malfunction, will not cease to function, does not generate incorrect data, and
does 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.


                                  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 Lender, 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.  Each Borrower shall obtain and maintain the
                        ---------
following insurance coverages:

          Section 6.4.1.  Casualty Insurance.  Each 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 Lender and sufficient to prevent any co-insurance
liability (which amount shall be the full insurable value).  Each Borrower shall
promptly supply the Lender upon request 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 Lender.  Each Borrower
shall give the Lender prompt notice of any material loss covered by such
casualty insurance.

          Section 6.4.2.  Liability and Worker's Compensation Insurance.  Each
                          ----------------------------------------------
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 Lender.  Each
Borrower shall obtain and maintain during the term of the Loan workers'
compensation insurance, in such amounts, with insurance companies,

                                      -21-
<PAGE>

and in forms reasonably acceptable to and approved by the Lender. Each Borrower,
on request, shall supply the Lender 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.  Each 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 Lender from
time to time as determined in its reasonable discretion.

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

          Section 6.6.  Maintenance of Existence.  Each 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.  Each Borrower
                        -------------------------------------
shall give (a) notice to the Lender 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 Lender of the
institution of any other suit or proceeding which might have a Material Adverse
Effect on the Collateral, or any Borrower's operations, financial condition,
property or business.

          Section 6.8.  Notice of Change of Business Location.  The Borrowers
                        -------------------------------------
shall notify the Lender thirty (30) days in advance of: (a) any change in the
location of a Borrower's 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 6.9.  Pension Plans.  Each 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 Lender 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 Lender of the occurrence of any
"reportable event" within the meaning of Section 4043(c) of ERISA (excluding a
reportable

                                      -22-
<PAGE>

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 6.10.  Maintenance of Assets and Properties.  The Borrowers
                         ------------------------------------
shall maintain their 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 Borrowers.

          Section 6.11.  Payment of Taxes.  Each Borrower shall pay or cause to
                         ----------------
be paid when and as due 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.  Each 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 6.12.  Further Assurances and Power of Attorney.  Each
                         ----------------------------------------
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 Lender 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 Lender.  Upon the written
request of the Lender that a Borrower execute any such document and the failure
of the Borrower to so execute 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 Lender 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 6.13.  Advances.  If any 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 any Borrower should fail to protect or preserve
the Collateral or the status and priority of the security interest of the Lender
in the Collateral, the Lender may make Advances to perform the same on behalf of
any Borrower.  The Lender shall endeavor to give prior notice to any Borrower of
all such 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 Loan and immediately upon advancement become
secured by the security interests created and confirmed by this Agreement and
the terms and provisions of this Agreement, the documents to be executed in
connection with this Agreement, and all of the applicable Loan Documents, and
shall become part of the principal amount owed to the Lender

                                      -23-
<PAGE>

with interest to be assessed at the applicable rate thereon. Any Borrower shall
repay on demand all sums so advanced on the Borrower's behalf, plus any
reasonable expenses or costs incurred by the Lender, 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 Lender upon the occurrence of an Event of Default
by any Borrower. The contrary notwithstanding, the authorization contained in
this Section shall impose no duty or obligation on the Lender to perform any
action or make any Advance on behalf of any Borrower and is for the sole benefit
and protection of the Lender.

          Section 6.14.  Maintain Records and Make Available to Lender for
                         -------------------------------------------------
Inspection.  Each Borrower shall maintain Records pertaining to the Collateral
----------
and the conduct and operation of its business, in such detail, form and scope as
the Lender shall from time to time require.  During normal business hours, the
Lender 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 Lender or the Lender's agents may enter upon any of any 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 Lender may send
verifications of Receivables to Account Debtors and may confer and correspond
with other creditors of any Borrower.  Upon the occurrence and during the
continuation of an Event of Default, the Lender 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 any
Borrower.  All audits, examinations and inspections shall be performed at each
Borrower's expense.

          Section 6.15.  Financial Statements.  PAC and the other Borrowers
                         --------------------
shall furnish the Lender:

          (a)  as soon as available but in no event later than November 1, of
each year, a consolidated statement of income and retained earnings of the
Borrowers for the fiscal year ending on June 30 of such year; a statement of
cash flows of the Borrowers for such year; consolidating schedules for such
year; and a balance sheet of the Borrowers as at the end of such year, setting
forth in each case in comparative form corresponding figures for the preceding
fiscal year of the Borrowers, prepared in accordance with GAAP consistently
applied and examined and audited by independent certified public accountants
satisfactory to the Lender, accompanied by notes of and a report of such
independent certified public accountants with respect to such financial
statements which is satisfactory to the Lender in all respects;

          (b)  Promptly after filing, copies of each Borrower's federal tax
return, including all schedules and other attachments thereto;

          (c)  As soon as practicable and in any event within forty-five (45)
days after the end of each calendar quarter, an unaudited financial statement
(excluding footnote disclosures) on a consolidated and individual basis for the
previous quarter, including an income statement, a balance sheet and a statement
of cash flows, all in detail and scope satisfactory to the Lender, certified as
true and complete by the chief financial officer of PAC.

                                      -24-
<PAGE>

          (d)  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;

          (e)  Such other information as the Lender may, from time to time,
request.

          Section 6.16.  Annualized EBITDA Ratio. PAC and its Subsidiaries shall
                         -----------------------
maintain, at the end of each fiscal quarter ending on or after September 30,
2002, an EBITDA Ratio greater than 1.0.

          Section 6.17.  Depository Banks.  PAC and each Subsidiary shall
                         ----------------
maintain its primary depository banking relation with a depository bank or banks
acceptable to the Lender.  The Borrowers shall deposit all cash receipts into an
account at the Depository Bank.  PAC shall provide the Lender 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.

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:

                                      -25-
<PAGE>

          (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 Lender, such
approval not to be unreasonably withheld. No Subsidiary shall issue any
additional stock unless issued to PAC, without the Lender'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; and (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; provided that, immediately after giving
effect thereto, no Event of Default would exist.

          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.

          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
                        ----------
Lender, 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;

                                      -26-
<PAGE>

          (b)  existing secured Indebtedness previously disclosed to the Lender;

          (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 Lender; 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;

          (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 Lender 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;

                                      -27-
<PAGE>

          (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;

          (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 Lender's prior written consent.

          Section 7.9.   Dividends.  Without the written consent of the Lender,
                         ---------
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 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.

                                      -28-
<PAGE>

          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 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 LENDER 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
Lender or (b) make any payment or prepayment with respect to any Subordinated
Debt, whether principal, interest or otherwise.

          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.

                                      -29-
<PAGE>

          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 Lender.

          Section 7.20.  Equity Ownership; Certificates.  Cause or permit (a)
                         ------------------------------
any of the Persons identified in Exhibit No. 9 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 Lender, together with such executed instruments of
transfer and assignment as the Lender may require.

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

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 Lender to exercise the Lender'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).

                                      -30-
<PAGE>

          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 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.  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 8.10. 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 8.11. Impairment of Collateral.  Any event or series of
                        ------------------------
events shall occur which the Lender deems, in good faith and in its sole
discretion, to impair the Collateral or

                                      -31-
<PAGE>

other security for the Loan or otherwise threaten the value thereof, and which
adversely affects the prospects of repayment of the Loan.

          Section 8.12.  Cure.  Notwithstanding anything above contained in this
                         ----
Article VIII,

          (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 6.8 if the Borrowers fail to notify the Lender 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 6.9 if the Borrowers fail, within thirty (30)
days after the occurrence of an event resulting in a violation of Section 6.9,
to remedy the violation.

          (e)  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.

          Any occurrence constituting an Event of Default by reason of the
failure to comply with Section 6.2 that is specifically identified in one of the
foregoing mentioned sections shall be subject to cure as above provided. Such
cure period may, in the Lender'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
Lender 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 Lender shall have no further obligation
to make any additional Advances under the Loan, and the Lender 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.

                                      -32-
<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 Lender, 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 Loan;

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

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

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

          (e)  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;

          (f)  Exercise any rights of a secured creditor under the Virginia
Uniform Commercial Code, Title 8.9 of the Code of Virginia, 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
Lender may specify; and

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

          Section 9.2.  Collection of Receivables by the Lender.  The Lender, 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
Lender shall have the right to send a notice of assignment or notice of the
Lender'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
Lender shall have the sole right to collect the Receivables and take possession
of the Collateral and Records relating thereto.  All of the Lender's actual and
reasonable collection expenses, including Liquidation Costs, shall be charged to
the Borrowers' account and added to the Obligations.  If the Lender is
collecting the Receivables as provided in this Section 9.2, the Lender shall
have the right to receive, endorse, assign and deliver in the Lender's name or
the Borrowers' name any and all checks, drafts and

                                      -33-
<PAGE>

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 Lender is collecting the Receivables directly as
above provided, the Borrowers hereby individually and collectively, jointly and
severally, constitute and appoint the Lender and/or the Lender'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
Lender'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 Lender 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 Lender 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 Lender 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 Lender, and the Lender 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 Lender 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 other disposition of the Collateral all reasonable expenses,
including all actual and reasonable expenses for legal services, the Lender
shall apply such proceeds toward the satisfaction of the Obligations in any
order or manner as the Lender 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
Lender shall designate. At any such sale or other disposition, the Lender 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

                                      -34-
<PAGE>

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
Lender under this Section, the Lender 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 Lender'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 Lender may determine in its sole
discretion. The Borrower shall indemnify and save harmless the Lender 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.  Attorneys' Fees and Expenses.  The Borrower shall pay
                        ----------------------------
all Liquidation Costs and/or actual and reasonable attorneys' fees and expenses
which the Lender 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 9.5.  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 9.6.  Proof of Sums Due on the Loan.  In any action or
                        -----------------------------
proceeding brought by the Lender to collect the sums owed on the Loan, an
affidavit made under oath by an officer of the Lender 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 9.7.  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 Lender, 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 Renewal 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 Lender; and (c) will not terminate or
attempt to terminate the Loan Documents for any cause.

                                      -35-
<PAGE>

                                   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 Lender and all
costs including, without limitation, the Lender's counsel fees, recordation
costs, costs of documentary stamps, photocopying expense, appraisals, lien
searches, travel expenses for the Lender'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
Lender.  The Lender is authorized to debit any account or accounts maintained by
the Borrowers at the Lender for the amount of any costs for which the Borrowers
have failed to reimburse the Lender.  The Borrowers acknowledge and agree that
the Lender will obtain title insurance coverage on each of the mortgages
described in Section 3.4 of this Agreement, in an amount not to exceed the fair
market value thereof, and that the Borrowers shall pay to the Lender the amount
of all title insurance company or agent charges related to such coverage.

          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 Lender 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 Lender at any time or from time to
time shall not constitute, unless specifically so expressed by the Lender 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
Lender or its agents, all of which are done for the sole benefit and protection
of the Lender.

          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 Lender.

          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 Lender and its successors and assigns.
Notwithstanding the foregoing, the Lender agrees that in the absence of an Event
of Default which has not been cured (if such Event of Default is subject to

                                      -36-
<PAGE>

cure), this Agreement shall not be assigned, in whole or in part, without (90)
days notice to PAC, and the Lender 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 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 Lender:

          PRECISION FUNDING, L.L.C.
          c/o Avenir Corporation
          1725 K Street, N.W., Suite 410
          Washington, D.C.   20006
          Attention:  Peter C. Keefe, Manager

          Telephone: 202-659-4427
          Facsimile: 202-659-4414

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

          PRECISION AUTO CARE, INC.
          748 Miller Drive, S.E.
          Leesburg, Virginia 20175
          Attention:   Louis M. Brown, Jr.
                       President and Chief Executive Officer
          Telephone: (703) 777-9095
          Telefax:   (703) 777-9190

          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.

                                      -37-
<PAGE>

          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 Lender may disclose financial
                          ----------
information concerning the Borrowers to any other financial institution that may
share, participate or join in the Loan.

          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 the Virginia
Uniform Commercial Code, Title 8.9 of the Code of Virginia, 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 Renewal Note. Any new Borrower shall deliver such additional
resolutions, certificates and agreements as the Lender may from time to time
reasonably require to grant liens or security interests to the Lender 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 Lender such written
agreements as the Lender may require pursuant to which PAC (or such Subsidiary)
shall pledge and grant a first priority security interest to the Lender 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
Renewal 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 Lender's right to receive payment in full of
the Obligations.  The Borrowers acknowledge and agree that the right of
contribution set forth above

                                      -38-
<PAGE>

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 Virginia 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 Virginia; the Borrowers hereby
consent to the jurisdiction of any state court within Virginia, or any federal
court located within the Eastern District of the State of Virginia for any
proceeding instituted hereunder or under any of the other Loan Documents, or
arising out of or in connection with this Agreement or any of the other Loan
Documents, or any proceeding to which the Lender 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 Lender 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 Lender and its directors, officers,
employees, attorneys, agents, successors, predecessors and assigns and any
affiliates, subsidiaries or related entities of the Lender 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.

          Section 10.20.  No Novation; Effect on Original Loan Documents, etc.
                          ----------------------------------------------------
The obligations of the Borrowers to the Lender as transferee of the Note and
instruments and documents executed and delivered in connection therewith,
including without limitation the Second Amended and Restated Loan and Security
Agreement, are completely restated, renewed and extended in this Agreement, and
the parties do not intend or effect any novation of said

                                      -39-
<PAGE>

obligations. Accordingly, subject to the foregoing and the immediately following
sentence, the Second Amended and Restated Loan and Security Agreement is
superseded by this Agreement. Notwithstanding the foregoing, the Second Amended
and Restated Loan and Security Agreement shall survive and remain in effect to
the extent that it grants Collateral as security for the obligations of any
Borrower.

          Section 10.21.  Construction.  The recitals of this Agreement are
                          -------------
incorporated as terms hereof. The terms of this Agreement and the other Loan
Documents shall be construed in a manner to insure that all of the Collateral
secures all of the Obligations, and no language of any documents other than the
deeds of trust/mortgages, and no course of dealing shall limit such construction
unless evidenced by a writing that expressly refers to this Section 10.21 and
the signatories' intention to depart from such construction.

          IN WITNESS WHEREOF, the Lender and the Borrowers have executed and
sealed this Agreement on this ______ day of October, 2000, effective as of
October 1, 2000, with the specific intention that this Agreement constitute a
document under seal.



WITNESS/ATTEST:               PRECISION FUNDING, L.L.C.


_____________________         By: /s/Peter C. Keefe           (SEAL)
                                  ----------------------------------
                                  Peter C. Keefe
                                  Manager


                              PRECISION AUTO CARE, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO


                              WE JAC CORPORATION



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                                      -40-
<PAGE>

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



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  -----------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO



                              ROCKY MOUNTAIN VENTURES, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  -----------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO



                              ROCKY MOUNTAIN VENTURES II, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  -----------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO


                              MIRACLE PARTNERS, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  -----------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                                      -41-
<PAGE>

                              RALSTON CAR WASH, LTD.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  -----------------------------------
                                  Louis M. Brown, Jr.
                                  Manager


                              PREMA PROPERTIES, LTD.


Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  General Manager

                              MIRACLE INDUSTRIES, INC.


Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                              KBG, LLC


Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  Manager


                              PTW, INC.


Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                              NATIONAL 60 MINUTE TUNE, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                                      -42-
<PAGE>

                              HYDRO-SPRAY CAR WASH
                              EQUIPMENT CO., LTD.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  Authorized Member



                              PRECISION TUNE AUTO CARE, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO



                              WORLDWIDE DRYING SYSTEMS, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                                      -43-
<PAGE>

                              PAC MEXICAN DELAWARE HOLDING
                              COMPANY, INC.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO



                              PAC MEXICAN HOLDING COMPANY, LLC



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President



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



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO



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



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------                  ---------------------------------
                                  Louis M. Brown, Jr.
                                  President and CEO

                                      -44-
<PAGE>

                              INDY VENTURES, L.L.C.



Everett F. Casey              By: /s/Louis M. Brown, Jr.     (SEAL)
----------------              --------------------------------------
                                     Louis M. Brown, Jr.
                                     Manager

                                      -45-
<PAGE>

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


DISTRICT OF COLUMBIA, to wit:



          I HEREBY CERTIFY that on this 11th day of October, 2000, before me,
the undersigned Notary Public, personally appeared Peter Keefe, who acknowledged
himself to be a Manager of Precision Funding, L.L.C., known to me (or
satisfactorily proved) to be the person who executed the foregoing Loan Renewal
and Security Agreement and acknowledged that he, being authorized so to do,
executed the same for the purposes therein contained as the duly authorized
Manager of Precision Funding, L.L.C., by signing the name of Precision Funding,
L.L.C. as Manager.

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



                                    /s/Darlene R. Archer
                                    --------------------
                                    Notary Public

Notary Public
District of Columbia
Darlene R. Archer
My Commission April 14, 2004

My Commission Expires:

_______________________

                                      -46-
<PAGE>

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


          I HEREBY CERTIFY that on this __________ day of __________________,
2000, before me, the undersigned, a Notary Public of the State of aforesaid,
personally appeared Louis M. Brown, Jr., 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:

__________________________

                                      -47-
<PAGE>

                                LIST OF EXHIBITS


Exhibit 1      Non-Borrower Mexican Subsidiaries

Exhibit 2      Existing Liens including the Grimaud Lien

Exhibit 3      Real Property owned by each Borrower

Exhibit 4      Defaults, Etc.

Exhibit 5      Evidence of Litigation

Exhibit 6      Names of Borrowers

Exhibit 7      Employee Benefit Plans

Exhibit 8      List of Registered Patents, Trademarks, Trade Names and
               Copyrights owned by Borrower

Exhibit 9      Equity Ownership

                                      -48-