STATEMENT OF UNDERSTANDING
This Statement of Understanding is entered into this 12th day of
October, 1997, by and between Precision Tune Auto Care, Inc. (PTAC) and the
Association of Precision Tune Area Subfranchisors (APTASF). With a view to the
best interests of the PAC system, the parties agree as follows:
1. PTAC will use its reasonable efforts to eliminate any territorial conflicts
overlaps between PTAC Area Subfranchisors (the Area Subs) and the Lube Depot
Developers in a manner which is in compliance with PTACs legal obligations and
in the best interests of the PTAC system (the System). As permitted by law, PTAC
shall seek the advice of an APTASF representative who is not affected by the
conflict or overlap. PTAC also agrees not to allow any Lube Depot Developer to
use the Precision xxxx in any territory in which a PTAC Area Sub has valid and
continuing area subfranchisor rights.
2. PTAC will provide each APTASF member which has a valid Area Subfranchisor
Agreement with an option for 14 months after the closing of the Precision Auto
Care, Inc. initial public offering (the IPO) to elect to execute a Precision
Lube Area Subfranchisor Agreement and/or a Precision Auto Wash Area
Subfranchisor Agreement. The terms of such agreements will be substantially the
same as their existing Area Sub agreements, except that the Precision Auto Wash
Agreement will provide for a 50/50 royalty split, if the Area Subs meet minimum
performance standards jointly developed by PTAC and APTASF. The agreements will
also require a prototype to be open and in operation within 24 months after the
IPO.
3. Prior to the execution of an applicable Area Sub agreement and in the event
that an Area Sub fails to execute an Area Sub agreement within the option period
described in Paragraph 2 above, PTAC shall have the right to establish, or
franchise others to establish, Precision Lube Express and Precision Auto Wash
operations, as applicable, in the Area Subs territory.
For centers established prior to execution of an applicable Area Sub
agreement, APTASF members shall have a right of first refusal to establish the
center itself under the then-current franchise terms.
For centers established after the expiration of the option period,
APTASF members shall have no rights whatsoever, except that (a) PTAC shall
adhere to site approval described in Paragraph 4 below; and (b) PTAC shall
indemnify the applicable APTASF member from any claim for encroachment by a PTAC
franchisee.
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4. PTAC and APTASF agree to jointly develop site approval criteria and
procedures for the locating of Precision Lube Express and Precision Auto Wash
operations in areas occupied by Area Subs. Area Subs shall have site location
vetoes for Precision Lube Express and Precision Auto Wash centers to be
established within their territories for centers which are located within a
certain distance (as jointly determined) of existing PTAC centers.
5. PTAC and APTASF agree to jointly develop procedures and criteria for transfer
and renewal of Area Sub agreements. Subject to compliance with applicable
contract requirements, such transfers and renewals will not be unreasonably
delayed, refused, or hindered.
6. PTAC and APTASF agree to jointly develop procedures for use of PTAC customer
lists with a view toward avoiding unfair competition with the Precision Lube
Express and Precision Auto Wash systems.
7. PTAC and APTASF agree to jointly develop procedures to assure that
advertising for the Precision Lube Express and Precision Auto Wash systems are
not unfairly subsidized by the PTAC system within the context of the previously
defined (in the S-1 Registration Statement) marketing contribution for the
Precision Lube Express and Precision Auto Wash systems.
8. PTAC and APTASF agree to jointly develop procedures and criteria for purchase
and acquisition of buildings, fixtures, equipment, and supplies, including which
items must be purchased from PTAC (or its affiliates), from approved suppliers,
or in accordance with specifications. APTASF members agree to voluntarily
purchase all such items from PTAC (or its affiliates) for the initial 24 months
of each members operations, with prices for such items to be competitive in the
market.
9. PTAC and APTASF agree to use reasonable efforts to jointly develop a system
agreement among PTAC, APTASF members, and, if possible, representatives of an
association of PTAC franchisees, in order to develop a joint process to address
certain system-wide issues to be agreed upon.
10. PTAC agrees to continue to provide appropriate management attention to PTACs
core businesses.
11. PTAC agrees to cease requiring APTASF members to sign a waiver for
non-drive-thru locations which PTAC approves as an exception to the drive-thru
only policy.
12. The APTASF members which have signed this Statement of Intent constitute the
officers of APTASF and represent that they have authority to act on behalf of
APTASF. Notwithstanding, APTASF shall use their best efforts to obtain the
acknowledgment, by signature, of all APTASF members within five days after
execution of this Statement of Understanding.
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13. APTASF states that APTASF has no objection to and does not, and will not,
oppose in any way whatsoever the Companys pending merger and financing
transactions. In this regard, APTASF agrees to use reasonable efforts to provide
comfort to the Companys underwriters with respect to the terms of this Statement
of Understanding and with regard to their good relations with PTAC.
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In Witness Whereof, the parties have executed this Statement of
Understanding as of the date first mentioned above.
Precision Tune Auto Care, Inc. Association of Precision Tune Area
Subfranchisors Members:
BY:_________________________ BY:________________________
Xxxx X. Xxxxxx, President Its:
BY:________________________
Its:
BY:________________________
Its:
BY:________________________
Its:
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