$252

Business Description

Matco Tools Corporation (“Matco” or “Matco Tools”) is a Delaware corporation, incorporated on January 12, 1993, with its principal office at 4403 Allen Road, Stow, Ohio 44224, telephone number (330) 929-4949. Matco is a wholly-owned subsidiary of TGA North America Holdings LLC (“TGA US”), and operates as an indirect wholly-owned subsidiary of Fortive Corporation (“Fortive”), which was a wholly owned subsidiary of Danaher Corporation (“Danaher”) until July 2, 2016. TGA US is Matco’s parent company. TGA US is a Delaware limited liability company with its principal office at 1209 Orange Street, Wilmington, Delaware 19801. TGA US does not operate Matco distributorships, and has not offered franchises in any line of business. Fortive is a Delaware corporation, incorporated on November 11, 2015, with its principal place of business at 6920 Seaway Blvd., Everett, WA 98203. Danaher is a Delaware corporation, with its principal place of business at 2200 Pennsylvania Avenue NW, Suite 800W, Washington, DC 20037-1701. Danaher created Fortive when it spun-off a portion of its business, assets, and portfolio companies into a new diversified industrial growth company (the “Fortive Spin-Off”). That transaction was completed as of July 3, 2016. TGA US was also formed as part of the Fortive Spin-Off.

Prior Experience

Matco has offered franchised distributorships since 1993. Other than as indicated in this Disclosure Document, Matco (or prior to February 1993, its predecessor MTC) has not offered distributorship agreements, franchises, or business opportunities in any other line of business. Matco is not engaged in any business other than the manufacture, distribution, sale and servicing of tools and equipment as described in this Disclosure Document. Matco’s affiliates have not offered franchises similar to the distributorship described in this Disclosure Document or in any other lines of business.

Business Offered

Matco is a manufacturer and distributor of professional quality tools, tool boxes, and service equipment. Matco has developed a distinctive business system (the “System”) relating to the establishment and operation of Matco mobile Distributorships which sell tools, tool boxes, service equipment, automotive diagnostic services, software subscriptions, and other goods and services, including, for example, apparel, model cars and other collectible items, and consumables (such as mechanic’s hand soaps), and such other items that Matco may in its sole discretion offer (collectively, the “Products”). Matco mobile Distributors offer and sell Products to professional mechanics, technicians, service professionals, and other businesses which operate from a single location and purchase tools for their own use. The Products currently consist of more than 15,800 items, many of which are manufactured by or for Matco, and are distributed by Matco and sold to our Distributor network. The System is identified by means of certain trade names, service marks, trademarks, logos and emblems, including the marks “MATCO®” and “MATCO® TOOLS” (the “Marks”). Matco also sells the Products through commercial sales representatives to businesses and educational institutions including students, schools, commercial and industrial accounts with central purchasing operations, multiple locations, state, local and federal agencies and/or to other commercial customers who generally purchase tools for their own internal use or supply tools to their employees through tuition-based kits, new apprentice programs, hiring/longevity incentives, tool cribs or other means. Matco’s commercial sales group also sells Matco Products through foreign-based wholesale distributors in countries outside of North America. In 2018, these sales accounted for approximately 4.1% of Matco’s revenues. Matco may also employ persons or utilize independent manufacturers’ representatives and specialized resellers to make sales calls and to support customers in specific market segments. Matco also uses export distributors and agents to promote its products in locations outside of the United States.

Initial Fees

Initial Franchise Fee for New Distributors When you sign the Distributorship Agreement you must pay Matco an initial franchise fee of $7,000 (the “Initial Franchise Fee”). (The Initial Franchise Fee for a new “225 Distributor” will be $4,600.) The Initial Franchise Fee must be paid in full, unless Matco agrees to finance all or a portion of the Initial Franchise Fee (see Item 10). The Initial Fee is fully-earned and non-refundable when you sign the Distributorship Agreement. However, Matco will refund the Initial Franchise Fee paid if you elect to terminate the Distributorship Agreement within the first 6 months after signing through the “6 Month Test Drive,” which is described below. Initial Franchise Fee for Renewing Distributors If you are renewing your right to operate a Distributorship under a Distributorship Agreement that was signed before March 2014 (which did not have a requirement to pay a renewal fee), Matco will waive the Initial Franchise Fee, and will not charge a renewal fee. If your Distributorship Agreement was signed after March 2014, you must pay the renewal fee set forth in your Distributorship Agreement in lieu of the Initial Franchise Fee. Initial Inventory Purchases You are required to purchase an initial inventory of Products from Matco (the “New Distributor Starter Inventory”) before the date you begin operating your Distributorship. In some instances, your initial inventory may be acquired from a predecessor Distributor. Currently, the minimum New Distributor Starter Inventory is generally $68,000, but may be higher (as discussed in the next paragraph). This amount may not be uniform for all Distributors, and Matco expects that the amount will range, generally, from $65,000 to $88,000 (see Item 7). In 2018, the minimum New Distributor Starter Inventory was generally $66,000, even though the New Distributor Starter Inventory ranged from $63,000 to $86,000 (depending upon the inventory selected). If you qualify, all or a portion of the cost of the New Distributor Starter Inventory may be financed through Matco (see Item 10). In addition, in response to Distributor requests to purchase more than the standard New Distributor Starter Inventory package, Matco may permit a Distributor to purchase more than the $68,000 initial starter inventory. Some Distributors and/or some routes may benefit from, or be able to handle, a larger initial inventory. So, while Matco will not require that you or any Distributor purchase more inventory than the “starter inventory,” if you wish to purchase more, Matco will consider that request, and, based on its review, Matco may grant your request. However, Matco will most likely not sell you more than $88,000 in initial inventory. Items 7 and 10 include disclosures and cost figures that reflect a larger initial inventory purchase, should you choose to do so. The required initial inventory for a new 225 Distributorship will be lower than that of a standard Distributorship, depending on the number of Potential Customers in the 225 Distributor’s List of Calls. In 2018, the minimum New Distributor Starter Inventory for a new 225 Distributorship was generally $44,000, even though the New Distributor Starter Inventory ranged from $42,500 to $66,000. We expect that in 2019 the minimum New Distributor Starter Inventory for a 225 Distributorship will generally be $46,000, and the New Distributor Starter Inventory will range from $44,500 to $68,000. An existing Distributor that converts to a “225” may gradually reduce its inventory to this lower initial inventory level. The required initial inventory for Distributors who sign an ETD Amendment will be larger than that of a standard Distributorship (approximately $68,209 to $114,030 depending on the number of minimum potential customers, but generally $83,692). By way of example only, if the List of Calls contains 450 Potential Customers, and the standard List of Calls includes 325 Potential Customers, 450 is 38% greater than 325. Consequently, the New Distributor Starter Inventory amount would be 38% greater than the standard $68,000 New Distributor Starter Inventory requirement, or $93,840. An existing Distributor that converts to an ETD may gradually increase its inventory to this higher initial inventory level. If you are a renewing Distributor, you will not be required to purchase a new inventory of Products. However, you must maintain the levels of inventory specified in your renewal Distributorship Agreement. “6-Month Test Drive” (Termination by Distributor During First Six Months) If you terminate the Distributorship Agreement for any reason within six months after the date of the Distributorship Agreement, you agree not to engage in or work in the mobile tool business for two years, and you have not failed to operate the Distributorship for more than 6 “business days” in total, or more than 3 consecutive “business days”, during this period, then Matco will (a) accept for return all stocked (not special ordered) new Products and complete sets you purchased through or from Matco during that 6-month period, and will credit to your open purchase account an amount equal to 100% of the purchase price you paid for the returned Products (i.e., a restocking fee will not apply assuming all conditions are satisfied); (b) credit your open purchase account for the lesser of (i) $3,400, (ii) an amount equal to 8 weekly payments under your Matco Truck lease, or (iii) the amount required to terminate the Truck lease if there are less than 8 weekly payments (and the calculation of the 8 weekly payments will commence 45 days following the later of (x) the last day that you actually operate the Distributorship, or (y) the date of the separation, or termination, letter from Matco); and (c) refund the Initial Franchise Fee you have paid to us, or that portion of the Initial Franchise Fee that you paid to us if Matco financed all or a portion of the Initial Franchise Fee. You and Matco will sign a joint and mutual release of all claims that each of the parties and their affiliates, employees and agents may have against the other in such form as Matco may specify. Matco will only make the payments to you that are described under the “6-Month Test Drive” program if you have complied with all post-termination obligations outlined in the Distributorship Agreement including, but not limited to, those related to confidentiality and non-competition. Regardless, you will remain liable for any indebtedness to Matco under the Distributorship Agreement or the operation of the Distributorship and any such indebtedness will be excluded from the mutual release. A “business day” is a weekday in which the shops or locations on the List of Calls are open for business, and “failed to operate” means not performing the typical route functions (such as customer visits, sales, and collection of monies owed). The “6-Month Test Drive” option to terminate is available only to a new Distributor for his/her first Distributorship. It is not available for additional Distributorships, for Matco Associates who purchase a franchise, for Conversion Distributors, for existing Distributors who convert to a “225 Distributor”, or for any Distributor upon a renewal, extension, or successor Distributorship Agreement. Except as specified in the 6-Month Test Drive Policy, or in Matco’s tool return policy, the cost of the New Distributor Starter Inventory is non-refundable. Currently, Matco’s tool return policy permits Distributors to return eligible products for credit, subject to a restocking fee (if applicable), during the Term of the Distributorship Agreement, or at the expiration or termination of the Distributorship Agreement. In particular, under Matco’s current tool return policy, if products are returned during the Term of the Distributorship, a Distributor will receive a credit to his/her Open Purchase Account that may be used for future purchases. If the Distributorship Agreement is terminated, the current policies provide that you may return certain Products to Matco in which case a credit will be applied to your account, or a refund will be paid to you. Matco may modify the tool return policy from time to time. (See Items 6 and 11 for additional discussion of the tool return policy.) Time Payment Sales – Time Payment Reserve and Time Payment Line of Credit “Time Payment” sales are a significant portion of the Completed Business (which is the revenue from sales of Matco Products and other products) in your Matco Distributorship. Time Payment sales are credit sales made by you to your customers. When you make a Time Payment sale, you will extend personal credit to finance the customer’s purchase of Products. You establish the terms and conditions for Time Payment sales to your customers, such as down payment, repayment schedule, interest charged, credit limits, and creditworthiness. However, Matco generally recommends that you require full payment on Time Payment sales in five to nine weeks but that you do not charge interest on these Time Payment sales. As you extend credit for Time Payment sales, you bear the risk of loss due to non-payment. Time Payment sales typically comprise a significant percentage (generally about 70%) of most Distributors’ sales. Currently, you must establish a “Time Payment Line of Credit” to help fund Time Payment sales if Matco finances all or a portion of your initial investment in a Distributorship. If you do not participate in one of Matco’s financing programs, you must establish and deposit funds into a “Time Payment Reserve Account” to help fund Time Payment Sales. The Time Payment Line of Credit and Time Payment Reserve Account are described below. Time Payment Line of Credit As discussed above, if you qualify for and obtain financing from Matco, you must establish a Time Payment Line of Credit with Matco to fund Time Payment sales. The Time Payment Line of Credit (also referred to as “TPLC” or “Time Payment LC” or “LC”) will be a revolving line of credit in which the Distributor may utilize up to $22,000 (or $28,000 if you are approved for an increased amount) to fund Time Payment Sales. Every week you will be required to send Matco, via the MDBS Software (defined below), at our headquarters your current Time Payment activity from your business records. Time Payment LC will be accessed automatically by Matco, on your behalf each week. The amount of credit from your Time Payment LC account will be used to pay for your Product inventory purchases. The amount of credit will be determined by calculating the net change in your time payment balances from week to week. The net change in your time payment balances, which is expressed as the retail cost of the Products sold, will be discounted by a factor to determine the approximate net cost value of the change in your time payment balances. The time payment transaction will be drawn on your Time Payment LC and will post directly on your weekly Open Purchase Account statement. Transfers from your Time Payment LC to pay for Product purchases will occur during periods of growth of your Time Payment sales balances. The Time Payment LC will be available only during the first year of operations under the Distributorship Agreement. Also, the Time Payment LC will be capped at $22,000 (or $28,000 if you are approved for an increased amount). All Time Payment LC monies will be provided at an interest rate of 5% over the Prime Rate. As of January 15, 2019, the Prime Rate was 5.5%, so the TPLC rate will be 10.50%. The Time Payment LC will be required of all Distributors, although the amount of credit that is extended may not be uniform, and will vary from Distributor to Distributor and will vary over time. See Item 10 below for additional disclosures regarding the Time Payment LC financing. Time Payment Reserve If you elect not to participate in (or fail to qualify for) one of Matco’s financing programs, you must deposit $22,000 into a “Time Payment Reserve Account” held by Matco at the time you sign the Distributorship Agreement. The purpose of the Time Payment Reserve account is to provide a source of funds in addition to cash collections to assist you in maintaining your inventory at adequate levels during the early development of your Distributorship. Every week you will be required to send Matco, via the MDBS Software (defined below), at Matco’s headquarters your current Time Payment activity from your business records. Your Time Payment Reserve account will be accessed automatically by Matco, on your behalf each week. The amount withdrawn from your Time Payment Reserve account will be used to pay for your Product inventory purchases. The amount withdrawn will be determined by calculating the net change in your time payment balances from week to week. The net change in your time payment balances, which is expressed as the retail cost of the Products sold, will be discounted by a factor to determine the approximate net cost value of the change in your time payment balances. The time payment transfer transaction will be drawn out of your Time Payment Reserve account and the credit will post directly on your weekly Open Purchase Account statement. Transfers from your Time Payment Reserve account to pay for Product purchases will occur during periods of growth of your Time Payment sales balances. Matco’s current policy provides that if, at the end of twelve months following your commencement of operations, there is any balance remaining in the Time Payment Reserve account, and your inventory meets or exceeds the starter inventory level, that amount will be credited by Matco to your Open Purchase Account. If your inventory level falls below that of the starter inventory, the Time Payment Reserve must be used to increase your inventory to the level of your original starter inventory. Any remaining Time Payment Reserve will be credited to your Open Purchase Account. All Time Payment Reserve account monies on deposit with Matco will earn interest at a rate of one quarter of one percent (1/4%) over the Fannie Mae Home Loan-b: bank money market rate as reported in Barron’s. At all times the money on deposit in your Time Payment Reserve account remains in your personal account to be used only as described above. New Distributors who enter into a 225 Amendment and have qualified for Matco financing will be required to utilize the Time Payment Line of Credit as discussed above. New and existing Distributors who enter into a 225 Amendment and have obtained financing other than through Matco will have a lower time payment reserve account requirement, which will range from approximately $14,750 to $20,750 depending on the minimum number of Potential Customers in their 225 Amendment. Transfers of Time Payment Accounts Receivable If you are replacing an existing Matco Distributor who is retiring or selling a Distributorship business, you may be offered the opportunity to purchase the preceding Distributor’s outstanding Time Payment accounts, if any, from the List of Calls and existing customers. Under normal circumstances, Matco’s policy is to recommend that you purchase the Time Payment accounts from the previous Distributor in accordance with current industry practice, which is to purchase qualified Time Payment accounts at 75% of their value. This percentage may only be exceeded with Matco’s prior written approval. Matco also normally recommends that you settle the Time Payment accounts with the previous Distributor only after you have had at least 25 business days to evaluate the creditworthiness of the Time Payment accounts purchased. Upon mutual agreement of you and the previous Distributor, payment is typically affected by a transfer of funds on deposit with Matco from your Time Payment Reserve account to the previous Distributor. There may be accounts with higher balances from the previous Distributor that can be collected by you (without purchasing the accounts). The recommended policy on these higher balance time payment accounts allows you to keep 15% of the weekly collections and remit the remaining 85% to the previous Distributor via the “Collected in behalf” process in MDBS Software. This percentage may only be exceeded with Matco’s prior written approval. Computer Software License Expenses Matco has developed computer software for the exclusive use of its Distributors. Matco’s proprietary copyrighted software system, called the Matco Distributor Business System (“MDBS Software”), is designed to assist you in minimizing paperwork, managing your List of Calls and route, handling inventory, receivables and order processing functions, and performing other tasks relating to operating the Distributorship. To ensure performance and software compatibility, your MDBS computer and software is restricted to your Matco business related functions. For example, to protect your computer from viruses, worms and spyware of any nature and to insure that the MDBS Software is not compromised, your MDBS computer should not be used to browse the Internet for personal use, it should not be used for gaming, and other third-party software should not be loaded and executed on the computer. You must sign the Matco Distributor Business System Software License, Maintenance and Support Agreement (the “Software License Agreement”) attached to this Disclosure Document and pay Matco the initial software license fee, which is currently $899, prior to the date you begin operating your Distributorship. There will be a onetime charge of an additional $100 for licensing Credit Card Processing Software and $45 license fee for Signature Pad processing software that interfaces with the MDBS Software. The Software License Agreement is for an initial term of one year, with automatic renewals for additional one year terms. Beginning with the second month of the Software License Agreement and each year thereafter, you will be required to pay an annual software maintenance fee, which is currently $450 for systems meeting Matco’s required specifications. If you have a system that does not meet Matco’s required specifications, including manufacturer, model, configuration, operating system, virus protection and/or non-Matco-specified use of third-party software and Internet sites, the annual charge for systems maintenance and support will include, in addition to the $450 fee, an annual charge of $400 until you comply, to Matco’s satisfaction, with Matco’s required and exact PC configuration and/or removal of non-Matco specified third party software. Computer software license expenses are non-refundable, and are uniformly imposed on all Distributors. Matco anticipates that the current version of MDBS will be upgraded later in 2019 at which time the $100 fee for the Credit Card Processing Software license will be dropped and replaced with an additional annual fee of $150 for credit card processing. Web Page Set-Up Fee Matco has established a Website for the entire system and offers you a web page (or subpage) on Matco’s Website. You are required to sign the Matco Tools Web Page Agreement (Exhibit Q to the Distributorship Agreement). Under this Agreement, you will have your own subpage on Matco’s website. Also, you must pay Matco a one-time web page set-up fee of $195 at the execution of the Web Page Agreement. Document Processing Fee When you elect to start a Matco franchise, Matco will prepare franchise and financial documents for you to review and execute, and, if necessary, will file applicable documents with state agencies as required. The processing/filing fees will be $99. You must pay this fee to Matco upon signing the Distributorship Agreement. Incentive Programs Matco participates in the VetFran Program (Veterans Transition Franchise Initiative) that was established by the International Franchise Association in cooperation with the U.S. Department of Veterans Affairs, the Veterans Corporation, and the U.S. Small Business Administration. Matco will provide to each new Distributor who is an honorably-discharged veteran of the U.S. military who purchases a “standard” or “ETD” Matco Distributorship $10,000 of hand tools (valued at list price) at no charge. An honorablydischarged veteran of the U.S. military who purchases a “225” Distributorship is eligible to receive $6,750 of hand tools (valued at list price) at no charge. Matco will require proof of eligibility from those prospective Distributors who wish to take advantage of the incentive offered under this program. This incentive may be used only once by a veteran and will not apply to additional franchises, or modifications to existing franchises or distributorships. Drug Testing Policy For Prospective Franchisees/Distributors. Matco has a drug testing policy for prospective franchisees/distributors. If you are interested in acquiring a Matco franchise, and you proceed successfully through the application process, before we grant a franchise to you, you must take and pass a drug test. The test, which is currently intended to test for alcohol and illegal drugs, will be administered by a third party testing company, and the results will be provided to you and to Matco. It will be administered at a facility within a reasonable distance from your home, and you must take the test within 5 days of our notice to you. The current cost of the test, or lab fee, is approximately $50 per test, per applicant. If you fail the test, you will not be granted a franchise, and you will not be required to pay the fee. If you pass the test, you will be granted a franchise, and the cost of the test, or lab fee, will be charged to your “Open Purchase Account,” and will be repaid over time based on your collections or revenues in your business. In connection with your application for the Matco franchise, in addition to the application forms, credit check authorization, and other documents, you must sign a consent to the alcohol and drug testing. A copy of our current consent form is attached to this Disclosure Document as Appendix I. If you have any employees that will attend Matco training, you must certify to Matco that your employee has complied with, and is in compliance with the drug-free workplace policy that you have established, consistent with and in compliance with applicable local, state and federal laws. Matco will not conduct drug testing on or for your employees, but will rely on your certification. For New/Existing Franchisees/Distributors/employees (during the term of the franchise). In addition to the drug testing policy for prospective franchisees/distributors, Matco has a drug testing policy for franchisees/distributors. Matco has expanded that policy to require that Distributors must implement a drug-free workplace policy which may include a drug testing policy for their employees (if any), consistent with the Matco policy and consistent with and in compliance with applicable laws. In addition to the drug testing for prospective franchisees/distributors, existing franchisees/distributors must undergo periodic or random alcohol and drug testing, at Matco’s direction. You must sign a consent to the drug testing that will apply during the term of your Distributorship. Matco will bear the cost of any testing or lab fees. Also, in the event you fail a drug or alcohol test, Matco will have the right to terminate your Distributorship. During the term of the Distributorship Agreement, Matco may periodically require that you certify that you and your employees are in compliance with your drug-free workplace policy that you have implemented, consistent with and in compliance with applicable local, state and federal laws. Matco’s current policy is that despite the acceptance of, or decriminalization of, the use or possession of marijuana in some jurisdictions, or the use of marijuana for medicinal purposes, Matco will follow federal drug use guidelines. In addition, despite any state law that may permit certain drug use, Matco Distributors and their employees may not operate the Mobile Store or perform work for the Distributorship while under the influence of drugs or alcohol. The purpose of the drug testing policy is to present a consistent brand experience for customers and Potential Customers and to try to protect the trademarks, service marks and brand from adverse consequences by trying to reduce or eliminate the possibility that a Distributor or one of its employees may operate or drive a Mobile Store under the influence of alcohol or drugs. This policy is not intended to dictate or control the Distributor’s employment policies or practices, or the Distributor’s employees.

Financing

Matco offers a number of financing programs to its Distributors, and they are summarized below and in the table that follows. There are six inventory financing programs, and one other financing program, that may be offered by Matco, to qualified Distributors: 1. The first type of financing is the standard Matco financing program (“Standard Initial Financing Program”) that covers the initial inventory and Initial Franchise Fee. This will generally be financing for $75,000 and up to $87,000. If you qualify for and elect to participate in either Supplemental Financing A or B, Matco will only finance up to $75,000 under this standard financing program. 2. The second type of financing is another Matco financing program that covers the initial inventory and Initial Franchise Fee, but includes a “balloon” payment at the end of the term (“Alternate Initial Financing Program (with Balloon Payment)”). This will generally be financing for $75,000 and up to $87,000. Neither Supplemental Financing A or B is available under the Alternate Initial Financing Program (with Balloon Payment). 3. The third type of financing (“Supplemental Financing ‘A’”) is for Distributors that meet Matco’s net worth and other financial requirements, but may have little or no access to start-up capital. If Matco determines that there are other factors that might justify extending credit for this situation, Matco may provide additional financing up to $33,000, which may include the Mobile Store security deposit and three months of lease payments (for a new Mobile Store), the computer hardware, three months of additional funds, and other start-up expenses. The interest rate for this financing is likely to be higher than the interest rate for the standard Matco financing program (to reflect, among other things, the higher risk). 4. The fourth type of financing (“Supplemental Financing ‘B’”) is for Distributors who do not meet Matco’s net worth requirements, have little or no access to start-up capital, and have little or no credit history. If Matco determines that there are other factors that might justify extending credit in this situation, Matco may finance up to an additional $33,000, which may include the Mobile Store security deposit and three months of lease payments (for a new Mobile Store), the computer hardware, three months of additional funds, and other start-up expenses. The interest rate for this financing is likely to be higher than the interest rate for the standard Matco financing program (to reflect, among other things, the higher risk). 5. The fifth type of financing is for Open Account Product Purchases, which is ongoing financing of inventory purchased on an open account as a revolving line of credit. 6. The sixth type of financing is the Time Payment Line of Credit (or “TPLC” or “Time Payment LC”). As described in Item 5, new Matco Distributors must fund Time Payment sales through a Time Payment Line of Credit (or TPLC), Matco will provide a line of credit to fund your inventory purchases following your Time Payment sales. The Time Payment LC will be a revolving line of credit. That is, when you collect money on the Time Payment sales and pay that to Matco, you will pay down your line of credit. Distributors can access this TPLC account until the end of the first year of operation, or when the account reaches $22,000 (or $28,000 if you are approved for an increased amount), whichever occurs first. 7. The seventh type of financing is “Inventory Plus” financing. This financing program is for qualified Distributors who seek an additional loan to cover or offset certain approved expenditures including a computer, MDBS fees (software, maintenance/support, and web setup), other miscellaneous fees (document preparation and filing, credit card software, and signature pad setup), and lodging and meals during training. The maximum amount of Inventory Plus financing is $6,000, and this amount will be credited to the Distributor’s OPA. Only Distributors who are participating in the Standard Initial Financing Program may be eligible for Inventory Plus financing. Distributors who purchase ETDs or 225s are not eligible for Inventory Plus financing. Distributors who obtain financing through Supplemental Financing “A” or Supplemental Financing “B” are not eligible for Inventory Plus financing. 8. The eighth type of financing is a bridge loan in situations in which a Distributor is obtaining 401(k)/IRA rollover funds through a program that is administered and facilitated by a third party. This is a short term loan from Matco to the Distributor during the period when the Distributor is waiting for the disbursement of the Distributor’s 401(k)/IRA rollover funds which will be used for payment of the investment in the Matco Distributorship. Installment Contracts (Purchase Security Agreements) In addition to the financing programs described above, Matco offers three customer installment financing programs to qualified Distributors. The purpose of these programs is to allow you to offer installment financing to your customers in amounts that are beyond your capacity to carry as Time Payment accounts. If you qualify to participate in the customer installment financing program, you may sell Products to your qualified customers pursuant to an installment sale contract (which is referred to as a purchase money security agreement or purchase security agreement (or “PSA”)), Matco will finance the purchase and accept assignment of the installment contracts under the terms and conditions of the Matco Purchase Security Agreements/Credit Assignment Agreements. Copies of these agreements are attached as exhibits to this Disclosure Document. Matco may consider one or more of the following factors when evaluating the qualifications of a Distributor for a Purchase Security Agreement and/or the terms under which Matco will purchase a customer’s installment contracts from a Distributor: (a) the Distributor’s purchase average, (b) the Distributor’s payment history on its Open Purchase Account, (c) the value of the Distributor’s PSA contracts as compared to cash payments on the Distributor’s Open Purchase Account, (d) the Distributor’s collection percentage from PSA accounts, (e) the customer’s collection history, and (f) the customer’s current and past credit history. Customers who are not U.S. citizens and/or may not possess social security numbers may not qualify for financing under the installment contract/PSA program. Matco offers several forms of Purchase Security Agreements/Credit Assignment Agreements to Distributors: (a) a non-recourse credit assignment agreement (see Exhibit K-1), and (b) a recourse credit assignment agreement with an addendum which provides that you need not obtain Matco’s prior approval of your credit history and the creditworthiness of the customer provided that the customer does not currently have a charged off account with Matco (referred to as the “PSA Gold Card”) (see Exhibit K-2). In addition, Matco will permit Distributors to offer PSA contracts to customers who do not qualify for Matco’s standard non-recourse PSA because of low credit scores or because of limited or no established credit. One program, which we refer to as the “Tech Start” program, can be offered to an applicant who does not qualify for Matco’s standard non-recourse PSA and who has limited or no prior established credit. This PSA program would finance a Product purchase of not less than $500 and not greater than $1500 up to a 12-month payment term and would include a provision for up to 100% recourse to the Distributor, but is currently offered at 50% recourse. Financing for additional purchases under this PSA program would be considered after 6 months of timely payments by the applicant. A second program, which we refer to as the “Tech Assured” program, can be offered to an applicant who does not qualify for Matco’s standard non-recourse PSA and who has a challenging credit history but is seeking to rebuild their credit score. This PSA program would finance a Product purchase of not less than a $500 minimum, and not greater than $1500 up to a 12- month payment term and would include a provision for up to 100% recourse to the Distributor, but is currently offered at 50% recourse. Financing for additional purchases under this PSA program would be considered after 6 months of timely payments by the applicant. If you take advantage of the Supplemental Financing “A” or “B” programs, you will not be eligible to offer the Tech Start or Tech Assured PSA programs to your customers until your supplemental Note is paid in full. You are also not eligible to offer the PSA Gold Card, Tech Start, and Tech Assured programs to your customers within the first year of your Distributorship. Under these forms of credit assignment agreements, upon acceptance of assignment of the customer’s installment contract, you will receive a credit corresponding to the value of the net amount financed, less a reserve charge, to your Open Purchase Account. This credit will be posted within 48 hours of the acceptance of a contract assignment by Matco. Under the current form of non-recourse credit assignment agreement, the price paid by Matco to you for acceptance of the assigned installment contracts will not be less than 85% of the net cash price (although Matco’s current practice is to assign installment contracts at 91% of the net cash price). (Net cash price is the price paid for the product, plus sale taxes, less any down payment paid in cash.) However, Matco may not accept assignment of any installment contract if the sale price exceeds the product’s list price. Depending on the amount financed of your promissory note, a percentage up to 5% of your PSA credit may be applied to reduce the principal on any outstanding Matco promissory note. Matco will release you from all liability for the installment contracts, subject to certain exceptions described in the agreement, and provided that you comply with the terms and conditions of the agreement. Under the Purchase Security Agreement/Credit Assignment Agreements, you must collect money owed by customers and remit the money to us. If you do not remit the full amount collected in a timely fashion, we may charge you an administrative fee, currently set at $25 per occurrence, per contract, for delinquent or insufficient payments, or inaccurate reporting, as consideration for, among other things, Matco’s time and efforts in collecting monies, additional correspondence with you, credit bureaus and others, and administrative time and costs to correct data. Under the current PSA Gold Card agreement the price paid by Matco to you for acceptance of the assigned installment contracts will not be less than 95% of the net cash price of the installment contracts (although Matco’s current practice is to assign installment contracts at 97% of the net cash price). However, Matco may not accept assignment of any installment contract if the sale price exceeds the product’s list price. The 3% deduction from the full net cost price of the assigned installment contracts is a charge payable to Matco as assignee of the assigned installment contracts. Matco has from time to time considered developing additional customer installment financing programs that may be recourse or non-recourse credit assignments, and/or may be available only to Distributors who (a) qualify to participate; (b) have a minimum of six months or more experience as a Matco Distributor; and (c) are in compliance with their Distributorship Agreement. Currently, however, the only Purchase Security Agreements available are those described above. Matco expects that if a new installment financing program is developed and offered in the future, participation in any such program will be voluntary. * * * Distributors that receive financing from Matco must: (a) prepare and submit annual budgets for their Distributorships to Matco, in the form Matco specifies, which contain estimates for the following year; (b) conduct a physical inventory in MDBS upon request, but not less than once every 12 months on the anniversary date of your Distributorship Agreement or at least every 6 months if you have a Note under the Supplemental Financing “A” or “B” programs; and (c) submit any other reports in the form and manner Matco specifies. Matco and/or its affiliates have in the past sold, and may in the future sell, assign, or discount, with limited recourse, certain accounts and notes receivable. To the extent the notes, contracts, or other instruments require Matco to provide services to you, Matco will remain liable to provide such services. However, the third party to whom the note, contract or other instrument is assigned may be immune under the law to defenses to payment you might have against Matco. Except as set forth above, Matco and its affiliates (a) do not directly or indirectly offer or arrange any financing, (b) do not receive direct or indirect payments for placing financing, and (c) do not guarantee your obligations to third parties.

Franchisee Revenue and Profit

Presented below in Charts 19-A and 19-B are certain operating and sales results from 1,394 Distributors during the period from January 1, 2018 through December 31, 2018. Chart 19-A reflects the average gross revenue figures, referred to as “Average Total Completed Business,” for the Matco Distributors, which includes the revenue from the sales of Matco Products and other products. Chart 19-A also includes the Median, and the Highest and Lowest gross revenue figures. The information is segregated into thirds, based on Total Completed Business. Chart 19-B reflects the average weekly sales figures for the Matco Distributors in 2018. Chart 19-B also includes the Median, and the Highest and Lowest weekly sales figures. The information in Chart 19-A and Chart 19-B is explained below. Please read carefully all of the information in this Item 19, and all of the notes following the data, in conjunction with your review of the historical data. Other than the preceding financial performance representations in this Item 19, Matco does not make any financial performance representations. We do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing distributorship, however, we may provide you with the actual records of that business. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting Michael S. Swanson, Matco’s Director of Franchise Program Development & Compliance, at Matco Tools Corporation, 4403 Allen Road, Stow, Ohio, 44224, 330-929-4949, the Federal Trade Commission and the appropriate state regulatory agencies.