SECOND AMENDED AND RESTATED
                          WAREHOUSING CREDIT AGREEMENT

                                      AMONG

                          PLM EQUIPMENT GROWTH FUND III
                          PLM EQUIPMENT GROWTH FUND IV
                           PLM EQUIPMENT GROWTH FUND V
                          PLM EQUIPMENT GROWTH FUND VI
                     PLM EQUIPMENT GROWTH & INCOME FUND VII
               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                          PLM FINANCIAL SERVICES, INC.

                                       AND

                   FIRST UNION NATIONAL BANK OF NORTH CAROLINA
                      AND SUCH OTHER FINANCIAL INSTITUTIONS
                        AS SHALL BECOME LENDERS HEREUNDER

                                       AND

                  FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
                                    AS AGENT








                                  May 31, 1996





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                          WAREHOUSING CREDIT AGREEMENT

                                TABLE OF CONTENTS

                                                                         Page




SECTION 1.        DEFINITIONS..............................................2

         1.1      Defined Terms............................................2
         1.2      Accounting Terms........................................18
         1.3      Other Terms.............................................18
         1.4      Schedules And Exhibits..................................19

SECTION 2.        AMOUNT AND TERMS OF CREDIT..............................19

         2.1      Commitment To Lend......................................19

                  2.1.1      Revolving Facility...........................19

                             (a)    Facility Commitments..................19
                             (b)    Each Loan.............................20

                  2.1.2      Funding......................................21
                  2.1.3      Utilization Of The Loans.....................21

         2.2      Repayment And Prepayment................................21

                  2.2.1      Repayment....................................21
                  2.2.2      Voluntary Prepayment.........................21
                  2.2.3      Mandatory Prepayments........................22

         2.3      Calculation Of Interest; Post-Maturity Interest.........22
         2.4      Manner Of Payments......................................23
         2.5      Payment On Non-Business Days............................23
         2.6      Application Of Payments.................................23
         2.7      Procedure For The Borrowing Of Loans....................23

                  2.7.1      Notice Of Borrowing..........................23
                  2.7.2      Unavailability Of LIBOR Loans................24

         2.8      Conversion And Continuation Elections...................24

                  2.8.1      Election.....................................24
                  2.8.2      Notice Of Conversion.........................24
                  2.8.3      Interest Period..............................25
                  2.8.4      Unavailability Of LIBOR Loans................25

         2.9      Discretion Of Lenders As To Manner Of Funding...........25
         2.10     Distribution Of Payments................................25
         2.11     Agent's Right To Assume Funds Available For Advances....25
         2.12     Agent's Right To Assume Payments Will Be Made By Borrower..26
         2.13     Capital Requirements....................................26
         2.14     Taxes...................................................27

                  2.14.1     No Deductions................................27
                  2.14.2     Miscellaneous Taxes..........................27
                  2.14.3     Indemnity....................................27
                  2.14.4     Required Deductions..........................27
                  2.14.5     Evidence of Payment..........................27
                  2.14.6     Foreign Persons..............................28
                  2.14.7     Income Taxes.................................28
                  2.14.8     Reimbursement Of Costs.......................29
                  2.14.9     Jurisdiction.................................29

         2.15     Illegality..............................................29

                  2.15.1     LIBOR Loans..................................29
                  2.15.2     Prepayment...................................29
                  2.15.3     Prime Rate Borrowing.........................30

         2.16     Increased Costs.........................................30
         2.17     Inability To Determine Rates............................30
         2.18     Prepayment Of LIBOR Loans...............................30

SECTION 3.        CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND 
                  THE MAKING OF LOANS............... 31

         3.1      Effectiveness of This Agreement.........................31

                  3.1.1      Partnership, Company And Corporate Documents..31
                  3.1.2      Notes........................................31
                  3.1.3      Opinion Of Counsel...........................31
                  3.1.4      Reaffirmation of Guaranty....................31
                  3.1.5      TEC AcquiSub Amendment.......................31
                  3.1.6      AFG Agreement................................31
                  3.1.7      Bringdown Certificate........................31
                  3.1.8      Fees.........................................32
                  3.1.9      Other Documents..............................32

         3.2      All Loans...............................................32

                  3.2.1      Notice Of Borrowing..........................32
                  3.2.2      No Event Of Default..........................32
                  3.2.3      Representations And Warranties...............32
                  3.2.4      Insurance....................................32
                  3.2.5      Other Instruments............................32

         3.3      Further Conditions To All Loans.........................32

                  3.3.1      General Partner Or Manager...................32
                  3.3.2      Removal Of General Partner Or Manager........33
                  3.3.3      Purchaser....................................33

SECTION 4.        BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.....33

         4.1      General Representations And Warranties..................33

                  4.1.1      Existence And Power..........................33
                  4.1.2      Loan Documents And Notes Authorized; Binding 
                             Obligations........................... 33
                  4.1.3      No Conflict; Legal Compliance................34
                  4.1.4      Financial Condition..........................34
                  4.1.5      Executive Offices............................34
                  4.1.6      Litigation...................................34
                  4.1.7      Material Contracts...........................35
                  4.1.8      Consents And Approvals.......................35
                  4.1.9      Other Agreements.............................35
                  4.1.10     Employment And Labor Agreements..............35
                  4.1.11     ERISA........................................35
                  4.1.12     Labor Matters................................36
                  4.1.13     Margin Regulations...........................36
                  4.1.14     Taxes........................................36
                  4.1.15     Environmental Quality........................36
                  4.1.16     Trademarks, Patents, Copyrights, Franchises And 
                             Licenses........................... 37
                  4.1.17     Full Disclosure..............................37
                  4.1.18     Other Regulations............................37
                  4.1.19     Solvency.....................................38

         4.2      Representations And Warranties At Time Of First Advance..38

                  4.2.1      Power And Authority..........................38
                  4.2.2      No Conflict..................................38
                  4.2.3      Consents And Approvals.......................38

         4.3      Survival Of Representations And Warranties..............38

SECTION 5.        BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS..............38

         5.1      Records And Reports.....................................39

                  5.1.1      Quarterly Statements.........................39
                  5.1.2      Annual Statements............................39
                  5.1.3      Borrowing Base Certificate...................39
                  5.1.4      Compliance Certificate.......................40
                  5.1.5      Reports......................................40
                  5.1.6      Insurance Reports............................40
                  5.1.7      Certificate Of Responsible Officer...........40
                  5.1.8      Employee Benefit Plans.......................40
                  5.1.9      ERISA Notices................................41
                  5.1.10     Pension Plans................................41
                  5.1.11     SEC Reports..................................41
                  5.1.12     Tax Returns..................................41
                  5.1.13     Additional Information.......................41

         5.2      Existence; Compliance With Law..........................42
         5.3      Insurance...............................................42
         5.4      Taxes And Other Liabilities.............................42
         5.5      Inspection Rights; Assistance...........................43
         5.6      Maintenance Of Facilities; Modifications................43

                  5.6.1      Maintenance Of Facilities....................43
                  5.6.2      Certain Modifications To The Equipment.......43

         5.7      Supplemental Disclosure.................................43
         5.8      Further Assurances......................................43
         5.9      Lockbox.................................................44
         5.10     Environmental Laws......................................44

SECTION 6.        BORROWER'S AND FSI'S NEGATIVE COVENANTS.................44

         6.1      Liens; Negative Pledges; And Encumbrances...............44
         6.2      Acquisitions............................................45
         6.3      Limitations On Indebtedness.............................45
         6.4      Use Of Proceeds.........................................46
         6.5      Disposition Of Assets...................................46
         6.6      Restriction On Fundamental Changes......................46
         6.7      Transactions With Affiliates............................47
         6.8      Maintenance Of Business.................................47
         6.9      No Distributions........................................47
         6.10     Events Of Default.......................................47
         6.11     ERISA...................................................47
         6.12     No Use Of Any Lender's Name.............................47
         6.13     Certain Accounting Changes..............................47
         6.14     Amendments Of Limited Partnership Or Operating Agreements..48

SECTION 7.        FINANCIAL COVENANTS OF BORROWER AND FSI.................48

         7.1      Maximum Funded Debt Ratio...............................48
         7.2      Minimum Debt Service Ratio..............................48
         7.3      Minimum Consolidated Tangible Net Worth.................48
         7.4      Cash Balances...........................................48

SECTION 8.        EVENTS OF DEFAULT AND REMEDIES..........................48

         8.1      Events Of Default.......................................48

                  8.1.1      Failure To Make Payments.....................48
                  8.1.2      Other Agreements.............................49
                  8.1.3      Breach Of Covenants..........................49
                  8.1.4      Breach Of Representations Or Warranties......49
                  8.1.5      Failure To Cure..............................49
                  8.1.6      Insolvency...................................50
                  8.1.7      Bankruptcy Proceedings.......................50
                  8.1.8      Material Adverse Effect......................50
                  8.1.9      Judgments, Writs And Attachments.............50
                  8.1.10     Legal Obligations............................51
                  8.1.11     TEC AcquiSub Agreement.......................51
                  8.1.12     AFG Agreement................................51
                  8.1.13     Change Of General Partner Or Manager.........51
                  8.1.14     Change Of Purchaser..........................51
                  8.1.15     Criminal Proceedings.........................51
                  8.1.16     Action By Governmental Authority.............52
                  8.1.17     Governmental Decrees.........................52

         8.2      Waiver Of Default.......................................52
         8.3      Remedies................................................52
         8.4      Set-Off.................................................53
         8.5      Rights And Remedies Cumulative..........................54

SECTION 9.        AGENT...................................................54

         9.1      Appointment.............................................54
         9.2      Delegation Of Duties....................................54
         9.3      Exculpatory Provisions..................................55
         9.4      Reliance By Agent.......................................55
         9.5      Notice Of Default.......................................55
         9.6      Non-Reliance On Agent And Other Lenders.................56
         9.7      Indemnification.........................................56
         9.8      Agent In Its Individual Capacity........................56
         9.9      Resignation And Appointment Of Successor Agent..........57

SECTION 10.       EXPENSES AND INDEMNITIES................................57

         10.1     Expenses................................................57
         10.2     Indemnification.........................................58

                  10.2.1     General Indemnity............................58
                  10.2.2     Environmental Indemnity......................58
                  10.2.3     Survival; Defense............................59

SECTION 11.       MISCELLANEOUS...........................................59

         11.1     Survival................................................59
         11.2     No Waiver By Agent Or Lenders...........................59
         11.3     Notices.................................................59
         11.4     Headings................................................60
         11.5     Severability............................................60
         11.6     Entire Agreement; Construction; Amendments And Waivers..60
         11.7     Reliance By Lenders.....................................61
         11.8     Marshalling; Payments Set Aside.........................61
         11.9     No Set-Offs By Borrowers................................61
         11.10    Binding Effect, Assignment..............................61
         11.11    Counterparts............................................63
         11.12    Equitable Relief........................................63
         11.13    Written Notice Of Claims; Claims Bar....................63
         11.14    Waiver Of Punitive Damages..............................63
         11.15    Relationship Of Parties.................................63
         11.16    Obligations Of Each Borrower............................64
         11.17    Co-Borrower Waivers.....................................65
         11.18    Governing Law...........................................66
         11.19    Consent To Jurisdiction.................................66
         11.20    No Novation.............................................66
         11.21    Waiver Of Jury Trial....................................66



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                                INDEX OF EXHIBITS


Exhibit A-1                Form of Revolving Promissory Note - EGF III

Exhibit A-2                Form of Revolving Promissory Note - EGF IV

Exhibit A-3                Form of Revolving Promissory Note - EGF V

Exhibit A-4                Form of Revolving Promissory Note - EGF VI

Exhibit A-5                Form of Revolving Promissory Note - EGF VII

Exhibit A-6                Form of Revolving Promissory Note - Income Fund I

Exhibit B                  Form of Borrowing Base Certificate

Exhibit C                  Form of Reaffirmation of Guaranty

Exhibit D                  Form of Opinion of Counsel (Stephen Peary)

Exhibit E                  Form of Compliance Certificate

Exhibit F                  Form of Lockbox Agreement

Exhibit G                  Form of Notice of Borrowing

Exhibit H                  Form of Notice of Conversion/Continuation

Exhibit I                  Form of Assignment and Acceptance


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                               INDEX OF SCHEDULES


Schedule A                 Commitments

Schedule 1.1               Amendments to Schedule A

Schedule 4.1.5    Executive Offices and Principal Places of Business

Schedule 4.1.6    Litigation

Schedule 4.1.7    Material Contracts

Schedule 4.1.8    Consent and Approvals

Schedule 4.1.15   Environmental Disclosures

Schedule 6.1               Existing Liens

Schedule 6.3(a)   Existing Indebtedness

Schedule 6.3(b)   Anticipated Indebtedness


                                       1
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                           SECOND AMENDED AND RESTATED
                          WAREHOUSING CREDIT AGREEMENT



         THIS SECOND  AMENDED  AND  RESTATED  WAREHOUSING  CREDIT  AGREEMENT  is
entered into as of May 31, 1996, by and among PLM  EQUIPMENT  GROWTH FUND III, a
California  limited  partnership  ("EGF III"),  PLM EQUIPMENT  GROWTH FUND IV, a
California  limited  partnership  ("EGF  IV"),  PLM  EQUIPMENT  GROWTH FUND V, a
California  limited  partnership  ("EGF V"),  PLM  EQUIPMENT  GROWTH  FUND VI, a
California  limited  partnership  ("EGF VI"), PLM EQUIPMENT GROWTH & INCOME FUND
VII, a California  limited  partnership  ("EGF  VII"),  and  PROFESSIONAL  LEASE
MANAGEMENT  INCOME FUND I, L.L.C., a Delaware limited liability company ("Income
Fund  I")  (EGF  III,  EGF IV,  EGF V, EGF VI,  EGF VII and  Income  Fund I each
individually  being a "Borrower" and,  collectively,  the "Borrowers"),  and PLM
FINANCIAL SERVICES,  INC., a Delaware  corporation and the sole general partner,
in the case of EGF III, EGF IV, EGF V, EGF VI and EGF VII, and the sole manager,
in the case of Income  Fund I ("FSI"),  and FIRST UNION  NATIONAL  BANK OF NORTH
CAROLINA  ("FUNB")  and each other  financial  institution  which may  hereafter
execute and deliver an instrument of assignment  with respect to this  Agreement
pursuant to Section 11.10 (each individually being a "Lender," and collectively,
the  "Lenders"),  and FIRST UNION NATIONAL BANK OF NORTH  CAROLINA,  as agent on
behalf and for the benefit of the Lenders (not in its individual  capacity,  but
solely as agent, the "Agent").  This Agreement  amends,  restates and supersedes
the Growth Fund Agreement (as defined below).

                                    RECITALS

         A.  Borrowers,  PLM  Equipment  Growth  Fund II, a  California  limited
partnership ("EGF II"), Lenders and Agent have entered into that certain Amended
and Restated  Warehousing  Credit  Agreement dated as of September 27, 1995 (the
"Growth Fund Agreement").

         B.  Borrowers,  FSI,  Lenders and Agent desire to amend and restate the
Growth Fund Agreement with this amended and restated Agreement and to remove EGF
II as a borrower under the revolving credit facility.

         C. Borrowers  desire,  on a several but not joint basis, to obtain from
Lenders a revolving credit facility with an aggregate principal  availability up
to but not to exceed the maximum  amount set forth on Schedule A for the purpose
of financing  the  purchase of  transportation  equipment  for periods up to one
hundred seventy-nine (179) days, all as more particularly described below.

         D. Lenders have agreed to make such credit available to Borrowers,  but
only upon the terms and subject to the conditions  hereinafter  set forth and in
reliance on the  representations and warranties set forth herein. This Agreement
amends, restates and supersedes the Growth Fund Agreement in the its entirety.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual  covenants  hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:



<PAGE>


 .        1.        DEFINITIONS

         .  As used herein, the following terms have the following meanings:

         "Acquisition" means, with respect to any Borrower, any transaction,  or
any series of related transactions,  by which such Borrower, FSI or any of FSI's
Subsidiaries,   including,   without  limitation,  TEC  AcquiSub,   directly  or
indirectly (a) acquires any ongoing business or all or substantially  all of the
assets of any Person or division thereof,  whether through a purchase of assets,
merger or otherwise,  or (b) acquires (in one  transaction or as the most recent
transaction in a series of  transactions)  control of at least a majority of the
stock  of a  corporation  having  ordinary  voting  power  for the  election  of
directors,  or (c)  acquires  control  of at least a majority  of the  ownership
interests in any partnership or joint venture.

         "Adjusted  LIBOR" means,  for each Interest  Period in respect of LIBOR
Loans,  an interest rate per annum (rounded  upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:

Adjusted LIBOR  =                 LIBOR
                  ----------------------------------------
                  1.00 - Eurodollar Reserve Percentage

1The Adjusted LIBOR shall be adjusted  automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.

         "Advance"  means any  Advance  made or to be made by any  Lender to any
Borrower as set forth in Section 2.1.1.

         "Affiliate"  means,  with respect to any Person,  (a) each Person that,
directly or indirectly,  through one or more  intermediaries,  owns or controls,
whether beneficially or as a trustee,  guardian or other fiduciary, five percent
(5.0%) or more of the stock  having  ordinary  voting  power in the  election of
directors of such Person or of the  ownership  interests in any  partnership  or
joint  venture,  (b) each Person that  controls,  is  controlled  by or is under
common control with such Person or any Affiliate of such Person,  or (c) each of
such Person's  officers,  directors,  joint  venturers  and partners;  provided,
however,  that in no case shall any Lender or Agent be deemed to be an Affiliate
of any Borrower or FSI for purposes of this  Agreement.  For the purpose of this
definition,  "control"  of a Person  shall  mean  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of its  management or
policies,  whether  through the ownership of voting  securities,  by contract or
otherwise.

         "AFG" means American Finance Group, Inc., a Delaware corporation.

         "AFG Agreement" means the Warehousing  Credit Agreement dated as of the
date hereof,  by and among AFG, and Lenders and Agent,  as the same from time to
time may be amended, modified, supplemented, renewed, extended or restated.

         "Agent"  means FUNB  solely  when  acting in its  capacity as the Agent
under this  Agreement  or any of the other  Loan  Documents,  and any  successor
Agent.

         "Agent's Side Letter" means the side letter  agreement  dated as of the
date hereof by and between Borrowers, TEC AcquiSub, AFG and Agent.

         "Agreement" means this Second Amended and Restated  Warehousing  Credit
Agreement dated as of May 31, 1996, including all amendments,  modifications and
supplements  hereto,  renewals,  extensions  or  restatements  hereof,  and  all
appendices,  exhibits and schedules to any of the foregoing,  and shall refer to
the Agreement as the same may be in effect from time to time.

         "Aircraft"  means any corporate,  commuter,  or commercial  aircraft or
helicopters,  with  modifications (as applicable) and replacement or spare parts
used in connection therewith,  including, without limitation,  engines, rotables
or propellers,  and any engines,  rotables and  propellers  used on a stand-lone
basis.

         "Applicable Margin" means:

                  (a) with respect to Prime Rate Loans,  zero  percent  (0.00%);
and

                  (b) with respect to LIBOR Loans, two percent (2.00%).

         "Assignment  and  Acceptance"  has the  meaning  set  forth in  Section
10.11.2.

         "Bank  Affiliate"  means a Person engaged  primarily in the business of
commercial  banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.

         "Bankruptcy  Code" means the  Bankruptcy  Code of 1978, as amended,  as
codified  under Title 11 of the United  States Code,  and the  Bankruptcy  Rules
promulgated thereunder, as the same may be in effect from time to time.

         "Borrowing  Base" means,  as  calculated  separately  for each Borrower
individually  as at any date of  determination,  an amount not to exceed the sum
of:

                           (a) fifty percent  (50.0%) of the  unrestricted  cash
available for the purchase of Eligible Inventory by such Borrower,

                  plus

                           (b) an  amount  equal to the  lesser  of (i)  seventy
percent (70.0%) of the aggregate net book value or (ii) fifty percent (50.0%) of
the aggregate net fair market value of all Eligible Inventory then owned by such
Borrower or a Marine  Subsidiary  or owned of record by an Owner Trustee for the
beneficial  interest of such Borrower or any Marine  Subsidiary of such Borrower
(provided,  however,  that  there  shall be  excluded  from this  clause (b) the
aggregate net book value or aggregate net fair market value, as the case may be,
of all items of  Eligible  Inventory  which are  either  (i)  off-lease  or (ii)
subject to a Lease under which any  applicable  lease or rental  payment is more
than  ninety  (90) days past due,  but only to the extent and in the amount that
the aggregate  net book value or net fair market  value,  as the case may be, of
such otherwise  excluded  Eligible  Inventory exceeds fifteen percent (15.0%) of
the respective net book value or net fair market value of all Eligible Inventory
included in this clause (b) notwithstanding this proviso),

                  less

                           (c) the  aggregate  Consolidated  Funded Debt of such
Borrower then  outstanding,  excluding the  aggregate  principal  amounts of the
Loans outstanding for such Borrower under the Facility,

in each  case  computed,  (1) with  respect  to any  requested  Loan,  as of the
requested  Funding Date (and shall include the item(s) of Eligible  Inventory to
be acquired  with the proceeds of the requested  Loan),  and (2) with respect to
the delivery of any monthly Borrowing Base Certificate to be furnished  pursuant
to  Section  5.1.3,  as of the last day of the  calendar  month for  which  such
Borrowing  Base  Certificate  is  furnished  (provided,  that for the purpose of
computing  the  Borrowing  Base,  in the  event  that any  Borrower  or a Marine
Subsidiary of such Borrower shall own less than one hundred percent  (100.0%) of
the record or beneficial  interests in any item of Eligible Inventory,  with one
or more of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only such Borrower's or such Marine
Subsidiary's,  as the case may be,  ratable  interest  in such item of  Eligible
Inventory).

         "Borrowing Base  Certificate"  means,  with respect to any Borrower,  a
certificate  with  appropriate  insertions  setting forth the  components of the
Borrowing  Base of such  Borrower as of the last day of the month for which such
certificate is submitted or as of a requested  Funding Date, as the case may be,
which  certificate shall be substantially in the form set forth in Exhibit B and
certified by a Responsible Officer of such Borrower.

         "Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking  institutions  located in the States of California or North
Carolina are  authorized  or permitted  by law or other  governmental  action to
close and,  with  respect to LIBOR  Loans,  means any day on which  dealings  in
foreign  currencies  and exchanges may be carried on by Agent and Lenders in the
London interbank market.

         "Casualty  Loss" means any of the following  events with respect to any
item of Eligible Inventory:  (a) the actual total loss or compromised total loss
of such item of Eligible  Inventory;  (b) such item of Eligible  Inventory shall
become lost, stolen,  destroyed,  damaged beyond repair or permanently  rendered
unfit  for use for any  reason  whatsoever;  (c)  the  seizure  of such  item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation  of such item of Eligible  Inventory;  or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.

         "Charges"  means,  with respect to any  Borrower,  all federal,  state,
county,  city,  municipal,  local,  foreign or other governmental taxes, levies,
assessments,  charges  or  claims,  in each case then due and  payable,  upon or
relating to (a) the Loans made to such Borrower  hereunder,  (b) such Borrower's
employees,  payroll,  income or gross receipts, (c) such Borrower's ownership or
use  of any of its  Properties  or  assets  or (d)  any  other  aspect  of  such
Borrower's business.

         "Closing" means the time at which each of the conditions  precedent set
forth in  Section 3 to the making of the first  Loan  hereunder  shall have been
duly fulfilled or satisfied by each Borrower.

         "Closing Date" means the date on which Closing occurs.

         "Code"  means  the  Internal  Revenue  Code of 1986,  as  amended,  the
Treasury  Regulations adopted thereunder and the Treasury  Regulations  proposed
thereunder  (to  the  extent  Requisite  Lenders,   in  their  sole  discretion,
reasonably  determine that such proposed  regulations  set forth the regulations
that  apply in the  circumstances),  as the same may be in  effect  from time to
time.

         "Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the  execution  and delivery of an  instrument of
assignment  pursuant to Section 11.10,  which  amendments  shall be evidenced on
Schedule 1.1.

         "Commitment Termination Date" means May 23, 1997.

         "Compliance  Certificate"  means,  with  respect  to  any  Borrower,  a
certificate signed by a Responsible  Officer of such Borrower,  substantially in
the  form of  Exhibit  E,  with  such  changes  as Agent  may from  time to time
reasonably  request  for the  purpose of having such  certificate  disclose  the
matters certified therein and the method of computation thereof.

         "Consolidated  EBITDA" means,  for any Borrower,  as measured as at any
date of determination for any period on a consolidated basis, the sum of (a) the
Consolidated  Net  Income of such  Borrower,  plus (b) all  amounts  treated  as
expenses for  depreciation and the amortization of intangibles of any kind, plus
(c) all accrued taxes on or measured by income,  plus (d) Consolidated  Interest
Expense, and in the cases of clauses (b), (c) and (d), above, each to the extent
included in the determination of Consolidated Net Income.

         "Consolidated Funded Debt" means, for any Borrower,  as measured at any
date of determination on a consolidated  basis, the total amount of all interest
bearing  obligations  (including   Indebtedness  for  borrowed  money)  of  such
Borrower,  capital lease obligations of such Borrower as a lessee and the stated
amount of all  outstanding  undrawn  letters of credit  issued on behalf of such
Borrower or for which such Borrower is liable.

         "Consolidated  Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.

         "Consolidated Interest Expense" means, for any Borrower, as measured at
any date of  determination  for any period on a  consolidated  basis,  the gross
interest  expense of such Borrower for the period  (including  all  commissions,
discounts,  fees and other charges in connection  with standby letters of credit
and similar instruments), less interest income for that period.

         "Consolidated  Net Income" means, for any Borrower,  as measured at any
date of determination for any period on a consolidated basis, the net income (or
loss) of such Borrower for such period taken as a single accounting period.

         "Consolidated Net Worth" means, for any Person, as measured at any date
of  determination,   the  difference  between   Consolidated  Total  Assets  and
Consolidated Total Liabilities.

         "Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of  determination,  the difference  between  Consolidated Net Worth and
Consolidated Intangible Assets.

         "Consolidated  Total Assets" means, for any Person,  as measured at any
date of determination on a consolidated basis, all assets of such Person.

         "Consolidated  Total Liabilities" means, for any Person, as measured at
any date of  determination  on a  consolidated  basis,  all  liabilities of such
Person.

         "Contingent  Obligation"  means,  as to any  Person,  (a) any  Guaranty
Obligation  of  that  Person  and (b)  any  direct  or  indirect  obligation  or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar  instrument  issued for the account of that Person or as to
which that Person is otherwise liable for  reimbursement of drawings,  (ii) with
respect to the  Indebtedness  of any  partnership or joint venture of which such
Person  is a partner  or a joint  venturer,  (iii) to  purchase  any  materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant  contract or other  related  document or  obligation  requires that
payment for such materials,  supplies or other  property,  or for such services,
shall be made  regardless  of whether  delivery of such  materials,  supplies or
other property is ever made or tendered,  or such services are ever performed or
tendered,  or (iv) in respect of any interest rate  protection  contract that is
not entered into in connection with a bona fide hedging  operation that provides
offsetting  benefits to such  Person.  The amount of any  Contingent  Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty  Obligation") be deemed equal to the maximum  reasonably
anticipated  liability  in respect  thereof,  and shall,  with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.

         "Debt Service Ratio" means, as measured separately for each Borrower as
at any date of  determination,  the ratio of (a) Consolidated  EBITDA to (b) the
sum of (i) Consolidated  Interest Expense plus (ii) an amount equal to three and
one-eighths  percent (3.125%) of Consolidated  Funded Debt (Consolidated  EBITDA
and  Consolidated  Interest  Expense to be measured on a quarterly basis for the
current fiscal quarter).

         "Default Rate" has the meaning set forth in Section 2.3.

         "Designated  Deposit Account" means a demand deposit account maintained
by Borrowers with FUNB designated by written notice from Borrowers to Agent.

         "Dollars"  and the sign "$" means lawful money of the United  States of
America.

         "EGF"  means  PLM   Equipment   Growth  Fund,   a  California   limited
partnership.

         "EGF II" means  PLM  Equipment  Growth  Fund II, a  California  limited
partnership.

         "EGF III" means PLM  Equipment  Growth Fund III, a  California  limited
partnership.

         "EGF IV" has the meaning set forth in the Preamble to this Agreement.

         "EGF V" has the meaning set forth in the Preamble to this Agreement

         "EGF VI" has the meaning set forth in the Preamble to this Agreement

         "EGF VII" has the meaning set forth in the Preamble to this Agreement.

         "Eligible  Assignee"  means (a) a commercial  bank organized  under the
laws of the United States,  or any state thereof,  and having a combined capital
and surplus of at least $100,000,000,  (b) a commercial bank organized under the
laws of any other  country  which is a member of the  Organization  for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined  capital and surplus of at least  $100,000,000,  provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.

         "Eligible Inventory" means, with respect to any Borrower, all Trailers,
Aircraft and Aircraft engines, Railcars,  cargo-containers,  marine vessels and,
if approved by Requisite Lenders, other related Equipment, in each case owned by
such  Borrower  or a Marine  Subsidiary  of such  Borrower  (or  jointly by such
Borrower and one or more of the other Equipment Growth Funds) or, subject to the
approval  of  Agent,  any  owner  trust  of  which  such  Borrower  is the  sole
beneficiary or owner (or is the beneficiary or owner jointly with one or more of
the other Equipment Growth Funds), as applicable,  or solely with respect to any
marine vessel registered in Liberia, The Bahamas,  Hong Kong, Singapore or other
registry acceptable to Agent in its sole discretion, any nominee entity of which
such Borrower or a Marine Subsidiary of such Borrower is the sole beneficiary or
direct or indirect  owner (or as the  beneficiary  or direct or  indirect  owner
jointly with one or more of the other Equipment Growth Funds).

         "Employee  Benefit  Plan"  means,  with  respect to any  Borrower,  any
Pension Plan and any employee  welfare  benefit plan, as defined in Section 3(1)
of ERISA,  that is maintained for the employees of such Borrower,  FSI or any of
FSI's Subsidiaries or any ERISA Affiliate of such Borrower.

         "Environmental Claims" means, with respect to any Borrower, all claims,
however  asserted,  by any  Governmental  Authority  or  other  Person  alleging
potential  liability or responsibility for violation of any Environmental Law or
for release or injury to the  environment or threat to public  health,  personal
injury  (including  sickness,   disease  or  death),  property  damage,  natural
resources damage, or otherwise  alleging liability or responsibility for damages
(punitive  or  otherwise),   cleanup,   removal,  remedial  or  response  costs,
restitution,  civil or criminal  penalties,  injunctive relief, or other type of
relief,  resulting  from or based upon (a) the presence,  placement,  discharge,
emission or release  (including  intentional  and  unintentional,  negligent and
non-negligent,  sudden or non-sudden,  accidental or  non-accidental  placement,
spills, leaks, discharges,  emissions or releases) of any Hazardous Material at,
in,  or  from  Property,  whether  or not  owned  by such  Borrower,  FSI or any
Subsidiary  of FSI,  or (b) any  other  circumstances  forming  the basis of any
violation, or alleged violation, of any Environmental Law.

         "Environmental Laws" means all foreign,  federal,  state or local laws,
statutes, common law duties, rules, regulations,  ordinances and codes, together
with  all   administrative   orders,   directed  duties,   requests,   licenses,
authorizations   and  permits  of,  and  agreements   with,   any   Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters,  including the Comprehensive  Environmental Response,  Compensation and
Liability Act of 1980,  the Clean Air Act, the Federal Water  Pollution  Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic  Substances  Control Act and the Emergency  Planning and
Community Right-to-Know Act.

         "Environmental Permit" has the meaning set forth in Section 4.1.15.

         "Equipment"  means,  with  respect  to  any  Borrower,   all  items  of
transportation related equipment owned directly or beneficially by such Borrower
or by any Marine  Subsidiary of such Borrower and held for lease or rental,  and
shall include  items of equipment  legal or record title to which is held by any
owner trust or nominee entity in which such Borrower or any Marine Subsidiary of
such Borrower holds the sole beneficial interest.

         "Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended,  as the same may be in  effect  from  time to time,  and any  successor
statute.

         "ERISA  Affiliate"  means,  as  applied  to any  Person,  any  trade or
business  (whether  or not  incorporated)  which is a member of a group of which
that Person is a member and which is under common  control within the meaning of
the regulations promulgated under Section 414 of the Code.

         "Eurodollar  Reserve  Percentage" means the maximum reserve  percentage
(expressed as a decimal,  rounded  upward to the nearest  1/100th of one percent
(0.01%)) in effect from time to time  (whether or not  applicable to any Lender)
under  regulations  issued by the  Federal  Reserve  Board for  determining  the
maximum  reserve  requirement  (including any emergency,  supplemental  or other
marginal reserve requirement) with respect to Eurocurrency  liabilities having a
term comparable to such Interest Period.

         "Event of Default" means any of the events set forth in Section 8.1.

         "Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended  from time to time as set forth on Schedule  1.1,  for
the  revolving  credit  facility  described  in Section  2.1.1 to be provided by
Lenders  to  Borrowers,  on a several  but not joint  basis,  according  to each
Lender's Pro Rata Share.

         "Federal  Funds  Rate"  means,  for any day,  the rate set forth in the
weekly   statistical   release   designated  as  H.15(519),   or  any  successor
publication,  published  by  the  Federal  Reserve  Board  (including  any  such
successor,  "H.15(519)")  for such  day  opposite  the  caption  "Federal  Funds
(Effective)".  If on any  relevant  day  such  rate  is  not  yet  published  in
H.15(519),  the rate for  such  day  will be the  rate  set  forth in the  daily
statistical  release  designated as the Composite 3:30 p.m.  Quotations for U.S.
Government Securities,  or any successor  publication,  published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation,  the rate for such day
will be the arithmetic  mean of the rates for the last  transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.

         "Federal  Reserve  Board"  means the Board of  Governors of the Federal
Reserve System and any successor thereto.

         "Fee  Letter"  means  the fee  letter  agreement  dated  as of the date
hereof, by and among Borrowers,  TEC AcquiSub, AFG, and Agent, on behalf and for
the benefit of Lenders.

         "Form 1001" has the meaning set forth in Section 2.14.6.

         "Form 4224" has the meaning set forth in Section 2.14.6.

         "FSI" means PLM Financial Services, Inc., a Delaware corporation.

         "Funded Debt Ratio" means, as measured  separately for each Borrower as
at any date of determination,  the ratio of (a) the Consolidated  Funded Debt of
such  Borrower to (b) the sum of (i) the  aggregate net fair market value of the
Equipment  owned of record  and  beneficially  by such  Borrower  or any  Marine
Subsidiary  of such  Borrower  or owned of  record by an Owner  Trustee  for the
beneficial  interest of such Borrower or any Marine  Subsidiary of such Borrower
plus (ii) the unrestricted cash available for the purchase of Eligible Inventory
for such Borrower  (provided,  that for the purpose of computing the Funded Debt
Ratio,  in the event that any Borrower or a Marine  Subsidiary  of such Borrower
shall own less than one hundred  percent  (100.0%)  of the record or  beneficial
interests  in any item of  Equipment,  with one or more of the  other  Equipment
Growth Funds owning of record or  beneficially  the remaining  interests,  there
shall be included any such Borrower's or such Marine  Subsidiary's,  as the case
may be, ratable interest in such item of Equipment).

         "Funding Date" means with respect to any proposed borrowing  hereunder,
the date funds are  advanced  to any  Borrower  for any Loan  requested  by such
Borrower.

         "GAAP" means generally  accepted  accounting  principles set forth from
time to time in the opinions and  pronouncements  of the  Accounting  Principles
Board and the American  Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar  function of  comparable  stature and  authority  within the  accounting
profession),  or in such  other  statements  by such  other  entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.

         "Governmental   Authority"  means  (a)  any  federal,   state,  county,
municipal or foreign  government,  or  political  subdivision  thereof,  (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department,  instrumentality  or public  body,  (c) any court or  administrative
tribunal or (d) with respect to any Person,  any  arbitration  tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.

         "Guaranty"  means that certain Guaranty dated as of September 27, 1995,
executed by FSI in favor of Lenders and Agent.

         "Guaranty  Obligation"  means, as applied to any Person,  any direct or
indirect  liability of that Person with respect to any  Indebtedness,  lease for
capital  equipment  other than  Equipment,  dividend,  letter of credit or other
obligation  (the  "primary   obligations")   of  another  Person  (the  "primary
obligor"),  including any obligation of that Person,  whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide  funds (i) for the payment or discharge of any such primary  obligation,
or (ii) to maintain  working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or  financial  condition  of the primary  obligor,  or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such  primary  obligation  of the ability of the primary  obligor to make
payment of such primary obligation,  or (d) otherwise to assure or hold harmless
the holder of any such primary obligation  against loss in respect thereof.  The
amount  of any  Guaranty  Obligation  shall be  deemed  equal to the  stated  or
determinable  amount of the primary obligation in respect of which such Guaranty
Obligation  is  made  or,  if  not  stated  or if  indeterminable,  the  maximum
reasonably anticipated liability in respect thereof.

         "Hazardous  Materials"  means all those  substances which are regulated
by, or which may form the  basis of  liability  under,  any  Environmental  Law,
including all substances  identified under any Environmental Law as a pollutant,
contaminant,  hazardous waste, hazardous  constituent,  special waste, hazardous
substance,  hazardous  material,  or toxic substance,  or petroleum or petroleum
derived substance or waste.

         "IMI" means PLM Investment  Management,  Inc., a California corporation
and a wholly-owned Subsidiary of FSI.

         "Income  Fund I" has the  meaning  set  forth in the  Preamble  to this
Agreement.

         "Indebtedness"  means, as to any Person,  (a) all  indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above,  all capital leases of such
Person as lessee,  (d) any  obligation of such Person for the deferred  purchase
price of Property or services (other than trade or other accounts payable in the
ordinary  course of business  and not more than ninety (90) days past due),  (e)
any  obligation  of such  Person  that is  secured  by a Lien on  assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person  arising under  acceptance  facilities or under  facilities  for the
discount of accounts  receivable  of such Person and (g) any  obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.

         "Indemnified Liability" has the meaning set forth in Section 10.2.

         "Indemnified Person" has the meaning set forth in Section 10.2.

         "Interest  Differential"  means,  with respect to any  prepayment  of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures,  the  difference  between (a) the per annum  interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as  practicable  to, the date of the prepayment for a LIBOR
Loan  commencing  on such  date and  ending  on the  last day of the  applicable
Interest Period.  The determination of the Interest  Differential by Agent shall
be conclusive in the absence of manifest error.

         "Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest  Period  applicable to such Loan and, with respect to Prime
Rate Loans,  the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan; provided, however, that if any Interest Period for
a LIBOR Loan exceeds three (3) months,  interest  shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.

         "Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Requesting  Borrower pursuant to
Section 2, in each  instance  commencing on the  applicable  Funding Date of the
Loan; provided, however, that any Interest Period which would otherwise end on a
day that is not a Business  Day shall end on the next  succeeding  Business  Day
except that in the instance of any LIBOR Loan, if such next succeeding  Business
Day falls in the next calendar month,  the Interest Period shall end on the next
preceding Business Day.

         "Investment  Company Act" means the Investment  Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.

         "IRS" means the Internal Revenue Service and any successor thereto.

         "Lease" means, for any Borrower,  each and every item of chattel paper,
installment  sales  agreement,  equipment lease or rental  agreement  (including
progress payment authorizations)  relating to an item of Equipment of which such
Borrower is the record or  beneficial  lessor and in respect of which the lessee
and lease terms (including,  without limitation, as to rental rate, maturity and
insurance coverage) are acceptable to Agent, in its reasonable  discretion.  The
term "Lease" includes (a) all payments to be made thereunder,  (b) all rights of
such Borrower therein, and (c) any and all amendments,  renewals,  extensions or
guaranties thereof.

         "Lending  Office"  means,  with  respect to any  Lender,  the office or
offices of the Lender  specified as its lending office  opposite its name on the
applicable  signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrowers and Agent.

         "LIBOR"  means,  with  respect to any Loan to be made,  continued as or
converted  into a LIBOR Loan,  the London  Inter-Bank  Offered Rate  (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which  Dollar  deposits  are  offered  to Agent by major  banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related  Interest Period with respect to such Loan
in an aggregate amount  approximately equal to the amount of such Loan and for a
period  of time  comparable  to the  number of days in the  applicable  Interest
Period.  The  determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.

         "LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.

         "Lien"  means  any  mortgage,  pledge,  hypothecation,  assignment  for
security,  security  interest,  encumbrance,  levy,  lien or charge of any kind,
whether  voluntarily  incurred  or arising  by  operation  of law or  otherwise,
affecting any Property,  including any agreement to grant any of the  foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security  interest,  and the filing of or  agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a  security  interest)  under the UCC or
comparable law of any jurisdiction.

         "Limited  Partnership  Agreement"  means (a) for EGF III,  the  Limited
Partnership  Agreement  dated as of October  15,  1987,  as amended by the First
Amended and Restated Limited  Partnership  Agreement as of February 9, 1988, the
Second Amended and Restated Limited Partnership  Agreement as of March 10, 1988,
a First  Amendment  to the  Second  Amended  and  Restated  Limited  Partnership
Agreement as of November 18, 1991 and the Reformed First Amendment to the Second
Amended and Restated Limited Partnership  Agreement as of November 18, 1991, (b)
for EGF IV, the Amended and Restated Limited  Partnership  Agreement dated as of
May 22,  1989,  (c) for EGF V, the  Limited  Partnership  Agreement  dated as of
November 14, 1989, (d) for EGF VI, the Amended and Restated Limited  Partnership
Agreement  dated as of December 20, 1991, and (e) for EGF VII, the Third Amended
and Restated Limited Partnership  Agreement of EGF VII dated as of May 10, 1993,
as amended by the First  Amendment  to the Third  Amended and  Restated  Limited
Partnership  Agreement  dated May 28, 1993 and by the Second  Amendment to Third
Amended and Restated Limited Partnership Agreement dated as of January 21, 1994.

         "Loan" has the meaning set forth in Section 2.1.1.

         "Loan  Document"  when used in the singular and "Loan  Documents"  when
used in the plural means any and all of this Agreement,  the Notes,  the Lockbox
Agreement  and the  Guaranty  and any and all other  agreements,  documents  and
instruments executed and delivered by or on behalf or support of any Borrower to
Agent or any Lender or any of their respective  authorized  designees evidencing
or otherwise  relating to the Advances and the Liens granted to Agent, on behalf
of Lenders,  with respect to the Advances,  as the same may from time to time be
amended, modified, supplemented or renewed.

         "Lockbox" has the meaning set forth in Section 5.9.

         "Lockbox  Agreement"  means the Agreement of even date herewith between
Borrowers,  FUNB and Agent on behalf of  Lenders,  substantially  in the form of
Exhibit F, relating to the Lockbox.

         "Marine  Subsidiary"  means,  for any  Borrower,  a Subsidiary  of such
Borrower (in which the remaining record or beneficial ownership interests may be
held by TEC AcquiSub or any Equipment  Growth Fund) organized for the purpose of
holding legal record title to one or more marine vessels or to aircraft rotables
and spare parts.

         "Material Adverse Effect" means, with respect to any Borrower,  any set
of circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect  whatsoever upon the validity or  enforceability  of
any Loan  Document,  (b) is or could  reasonably  be expected to be material and
adverse to the condition (financial or otherwise) or business operations of such
Borrower  or FSI,  (c)  materially  impairs or could  reasonably  be expected to
materially   impair  the  ability  of  such  Borrower  or  FSI  to  perform  its
Obligations,  or (d)  materially  impairs or could  reasonably  be  expected  to
materially  impair the  ability of Agent or any Lender to enforce  any of its or
their legal remedies pursuant to the Loan Documents.

         "Maturity  Date" means,  with respect to each Loan  advanced by Lenders
hereunder,  the date  which is one  hundred  seventy-nine  (179)  days after the
Funding  Date of such Loan or such  earlier  or later date as  requested  by the
Requesting  Borrower  and  approved  by  Requisite  Lenders,  in their  sole and
absolute discretion; provided, however, in no event shall any Maturity Date be a
date which is later than the Commitment Termination Date.

         "Maximum Availability" has the meaning set forth in Section 2.1.1.

         "Multiemployer   Plan"  means,   with  respect  to  any   Borrower,   a
"multiemployer  plan" as defined in Section  4001(a)(3)  of ERISA,  and to which
such Borrower,  FSI or any of FSI's  Subsidiaries or any ERISA Affiliate of such
Borrower,  FSI or any of FSI's  Subsidiaries is making, or is obligated to make,
contributions or has made, or been obligated to make,  contributions  within the
preceding five (5) years.

         "Note" has the  meaning set forth in Section  2.1.1(a)(i),  and any and
all replacements, substitutions and renewals thereof.

         "Notice of Borrowing"  means a notice given by any Borrower to Agent in
accordance  with  Section  2.7,  substantially  in the form of  Exhibit  G, with
appropriate insertions.

         "Notice  of  Conversion/Continuation"  means  a  notice  given  by  any
Borrower to Agent in accordance with Section 2.8,  substantially  in the form of
Exhibit H, with appropriate insertions.

         "Obligations" means, with respect to any Borrower, all loans, advances,
liabilities and  obligations for monetary  amounts owing by such Borrower to any
Lender or Agent, whether due or to become due, matured or unmatured,  liquidated
or  unliquidated,  contingent  or  non-contingent,  and all covenants and duties
regarding  such  amounts,  of any kind or nature,  arising under any of the Loan
Documents.  This term includes,  without  limitation,  all  principal,  interest
(including  interest that accrues after the commencement of a case or proceeding
against such Borrower  under the  Bankruptcy  Code),  fees,  including,  without
limitation,  any  and all  prepayment  fees,  facility  fees,  commitment  fees,
arrangement  fees,  agent fees and  attorneys'  fees and any and all other fees,
expenses,  costs or other sums chargeable to such Borrower under any of the Loan
Documents.

         "Operating  Agreement"  means the Fifth Amended and Restated  Operating
Agreement of Income Fund I, entered into as of January 24, 1995.

         "Opinion of  Counsel"  means the  favorable  written  legal  opinion of
Stephen  Peary,  general  counsel  of FSI on behalf of FSI for itself and as the
sole  general  partner or managing  member,  as  applicable,  of each  Borrower,
substantially  in the form of Exhibit D,  together  with copies of any officer's
certificate  or legal  opinion  of  another  counsel  or law  firm  specifically
identified and expressly relied upon by such counsel in its opinion.

         "Other Taxes" has the meaning set forth in Section 2.14.2.

         "Overadvance"  has the meaning set forth in Sections  2.1.1(a)(iii) and
(iv).

         "Owner  Trustee"  means  any  Person  acting in the  capacity  of (a) a
trustee for any owner trust or (b) a nominee entity,  in each case holding title
to any  Eligible  Inventory  pursuant to a trust or similar  agreement  with any
Borrower or FSI.

         "PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.

         "Pension  Plan"  means,  with  respect to any  Borrower,  any  employee
pension  benefit plan,  as defined in Section 3(2) of ERISA,  that is maintained
for the  employees of such  Borrower,  FSI or any of FSI's  Subsidiaries  or any
ERISA Affiliate of such Borrower, FSI or any of FSI's Subsidiaries, other than a
Multiemployer Plan.

         "Permitted Liens" has the meaning set forth in Section 6.1.

         "Permitted  Rights of  Others"  means,  as to any  Property  in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary  interest of a lessor under a lease of such
Property and (c) an option or right of the lessee under a lease of such Property
to purchase such property at fair market value.

         "Person" means any individual, sole proprietorship,  partnership, joint
venture,   limited  liability  company,  trust,   unincorporated   organization,
association,  corporation,  institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.

         "PLMI" means PLM International, Inc., a Delaware corporation.

         "Potential  Event of Default"  means a condition or event which,  after
notice or lapse of time or both, will constitute an Event of Default.

         "Prepayment Date" has the meaning set forth in Section 2.2.2.

         "Prime  Rate"  means,  at any  time,  the rate of  interest  per  annum
publicly  announced from time to time by FUNB as its prime rate.  Each change in
the Prime Rate shall be  effective as of the opening of business on the day such
change in the Prime Rate occurs.  The parties hereto  acknowledge  that the rate
announced  publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.

         "Prime Rate Loan" means any  borrowing  which bears  interest at a rate
determined with reference to the Prime Rate.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.

         "Pro Rata Share" means,  for any Lender,  the proportion  such Lender's
Commitment  with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.

         "Public  Utility  Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C.  ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.

         "Railcar"  means  all  railroad  rolling  stock,   including,   without
limitation,  all coal, timber,  plastic pellet,  tank, hopper, flat and box cars
and locomotives.

         "Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of Guaranty,  dated as of the date  hereof,  executed by FSI in favor of Lenders
reaffirming its obligations under the Guaranty.

         "Regulations  G, T, U and X" means,  collectively,  Regulations G, T, U
and X adopted by the Federal  Reserve  Board (12 C.F.R.  Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.

         "Requesting  Borrower" means any Borrower requesting a Loan pursuant to
Section 2.1.1.

         "Requirement  of Law" means,  as to any Person,  any law  (statutory or
common),  treaty, rule, regulation,  guideline or determination of an arbitrator
or of a Governmental  Authority,  in each case applicable to or binding upon the
Person or any of its  property or to which the Person or any of its  property is
subject.

         "Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this  Agreement,  or, in the event there are no amounts  outstanding,  the
Commitments,  is  greater  than  sixty  percent  (60.0%)  of  all  such  amounts
outstanding or the total Commitments, as the case may be.

         "Responsible  Officer"  means  for  (i)  FSI,  any  of  the  President,
Executive  Vice  President,  Chief  Financial  Officer,  Secretary  or Corporate
Controller of FSI having  authority to request  Advances or perform other duties
required  hereunder,  and (ii) Borrowers,  any of the President,  Executive Vice
President,  Chief Financial Officer, Secretary or Corporate Controller of FSI as
the sole  general  partner of EGF III,  EGF IV, EGF V, EGF VI or EGF VII, as the
case may be, or sole manager of Income Fund I, in each case having  authority to
request Advances or perform other duties required hereunder

         "SEC" means the  Securities  and Exchange  Commission and any successor
thereto.

         "Solvent"  means, as to any Person at any time, that (a) the fair value
of the  Property  of such  Person is greater  than the  amount of such  Person's
liabilities  (including  disputed,  contingent and unliquidated  liabilities) as
such value is  established  and  liabilities  evaluated  for purposes of Section
101(31) of the  Bankruptcy  Code;  (b) the present  fair  saleable  value of the
Property  in an orderly  liquidation  of such Person is not less than the amount
that will be required to pay the probable  liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and  unliquidated  liabilities) as they mature in the normal course of business;
(d) such  Person does not intend to, and does not  believe  that it will,  incur
debts or  liabilities  beyond  such  Person's  ability  to pay as such debts and
liabilities  mature;  and (e)  such  Person  is not  engaged  in  business  or a
transaction,  and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.

         "Subsidiary"  means,  with  respect  to any  Person,  any  corporation,
association,  partnership,  limited  liability  company or other business entity
(other than  Equipment  Growth  Funds) of which an  aggregate  of fifty  percent
(50.0%) or more of the  beneficial  interest (in the case of a  partnership)  or
fifty  percent  (50%) or more of the  outstanding  stock,  units or other voting
interest  having  ordinary  voting  power to elect a majority of the  directors,
managers or trustees of such Person  (irrespective of whether,  at the time, the
stock,  units or other  voting  interest  of any other  class or classes of such
Person shall have or might have voting  power by reason of the  happening of any
contingency)  is  at  the  time,  directly  or  indirectly,   owned  legally  or
beneficially by such Person and/or one or more Subsidiaries of such Person.

         "Taxes" has the meaning set forth in Section 2.14.1.

         "TEC" means PLM  Transportation  Equipment  Corporation,  a  California
corporation and a wholly-owned Subsidiary of FSI.

         "TEC AcquiSub" means TEC AcquiSub,  Inc., a California  special purpose
corporation and a wholly-owned Subsidiary of TEC.

         "TEC  AcquiSub  Agreement"  means the Amended and Restated  Warehousing
Credit  Agreement dated as of September 27, 1995, as amended by the TEC AcquiSub
Amendment,  by and among TEC  AcquiSub,  Lenders and Agent,  and as the same may
from time to time be further amended, modified, supplemented,  renewed, extended
or restated.

         "TEC  AcquiSub  Amendment"  means the  Amendment  No. 1 to Amended  and
Restated  Warehousing Credit Agreement dated as of the date hereof, by and among
TEC AcquiSub, Lenders and Agent.

         "Termination  Event"  means,  with  respect  to  any  Borrower,  (a)  a
"reportable event" described in Section 4043 of ERISA and the regulations issued
thereunder  (other  than a  reportable  event not subject to the  provision  for
30-day notice to the PBGC under such regulations), or (b) the withdrawal of such
Borrower, FSI or any of FSI's Subsidiaries or any of their ERISA Affiliates from
a  Pension  Plan  during  a plan  year in which  any of them was a  "substantial
employer"  as  defined in Section  4001(a)(2)  of ERISA,  or (c) the filing of a
notice of intent to terminate a Pension Plan or the  treatment of a Pension Plan
amendment as a termination  under Section 4041 of ERISA,  or (d) the institution
of  proceedings  to terminate a Pension Plan by the PBGC, or (e) any other event
or condition which might constitute  grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.

         "Trailer"  means (a)  vehicles  having a minimum  length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.

         "UCC" means the Uniform  Commercial  Code as the same may, from time to
time, be in effect in the State of North  Carolina;  provided,  however,  in the
event  that,  by  reason  of  mandatory  provisions  of law,  any and all of the
attachment,  perfection or priority of the Lien of Agent,  on behalf of Lenders,
in and to any collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction  other than the State of North Carolina,  the term "UCC" shall
mean the Uniform  Commercial  Code as in effect in such other  jurisdiction  for
purposes of the provisions  hereof  relating to such  attachment,  perfection or
priority and for purposes of definitions related to such provisions.

         "Utilization  Leases"  means  Leases  for  Equipment  held for lease in
pooling or similar  arrangements  where the actual  rental  payments  under such
Lease is based on and for the  actual  period  of  utilization  of such  item of
Equipment rather than the Lease term.

         . Any  accounting  term  used  in this  Agreement  shall  have,  unless
otherwise  specifically provided herein, the meaning customarily given such term
in accordance with GAAP, and all financial data required to be submitted by this
Agreement shall be prepared and computed, unless otherwise specifically provided
herein,  in  accordance  with  GAAP.  That  certain  terms or  computations  are
explicitly  modified by the phrase "in accordance  with GAAP" shall in no way be
construed to limit the foregoing. In the event that GAAP changes during the term
of this Agreement  such that the covenants  contained in Section 7 would then be
calculated in a different manner or with different  components,  (a) the parties
hereto  agree to amend this  Agreement  in such  respects  as are  necessary  to
conform those  covenants as criteria for evaluating  each  Borrower's  financial
condition to  substantially  the same criteria as were  effective  prior to such
change in GAAP and (b) each Borrower  shall be deemed to be in  compliance  with
the covenants  contained in the aforesaid  subsections during the sixty (60) day
period following any such change in GAAP if and to the extent that each Borrower
would have been in  compliance  therewith  under  GAAP as in effect  immediately
prior to such change.

         . All other undefined terms contained in this Agreement  shall,  unless
the context  indicates  otherwise,  have the meanings provided for by the UCC to
the extent the same are used or defined  therein.  The words "herein,"  "hereof"
and  "hereunder"  and other words of similar import refer to this Agreement as a
whole,  including  the Exhibits and Schedules  hereto,  all of which are by this
reference incorporated into this Agreement, as the same may from time to time be
amended, modified or supplemented, and not to any particular section, subsection
or  clause  contained  in this  Agreement.  The term  "including"  shall  not be
limiting or exclusive,  unless specifically  indicated to the contrary. The term
"or" is  disjunctive;  the  term  "and" is  conjunctive.  The  term  "shall"  is
mandatory;  the term "may" is  permissive.  Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural,  and pronouns  stated in the masculine,  feminine or neuter
gender shall include the masculine, feminine and the neuter.

         . Any reference to a "Section,"  "Subsection," "Exhibit," or "Schedule"
shall refer to the relevant  Section or  Subsection of or Exhibit or Schedule to
this Agreement, unless specifically indicated to the contrary.

 .        2.        AMOUNT AND TERMS OF CREDIT

         .        1         Commitment To Lend

                  . Subject to the terms and conditions of this Agreement and in
reliance upon the  representations and warranties of Borrowers set forth herein,
Lenders  hereby  agree  to make  Advances  (as  defined  below)  of  immediately
available funds to Borrowers,  on a revolving basis, from the Closing Date until
the Business Day immediately  preceding the Commitment  Termination Date, in the
aggregate  principal amount  outstanding at any time not to exceed the lesser of
(a) the total Commitments for the Facility less the aggregate  principal amounts
then outstanding under the TEC AcquiSub Agreement and under the AFG Agreement or
(b) for any one  Borrower,  its  respective  Borrowing  Base (such lesser amount
being the  "Maximum  Availability"),  as more  fully  set forth in this  Section
2.1.1.  The  obligation  of Borrowers to repay the Advances made to any Borrower
shall be several but not joint.

                           .        (a)      Facility Commitments

                                 (i)  On  the  Funding  Date  requested  by  any
         Borrower (the  "Requesting  Borrower"),  after such Borrower shall have
         satisfied all applicable  conditions  precedent set forth in Section 3,
         each Lender shall advance  immediately  available  funds to Agent (each
         such advance  being an  "Advance")  evidencing  such  Lender's Pro Rata
         Share  of  a  loan  ("Loan").  Agent  shall  immediately  advance  such
         immediately  available funds to such Borrower at the Designated Deposit
         Account (or such other deposit  account at FUNB or such other financial
         institution  as to which such  Borrower  and Agent shall agree at least
         three (3) Business  Days prior to the  requested  Funding  Date) on the
         Funding Date with respect to such Loan. The  Requesting  Borrower shall
         pay  interest  accrued  on the Loan at the rates and in the  manner set
         forth in Section 2.1.1(b).  Subject to the terms and conditions of this
         Agreement,  the  unpaid  principal  amount of each Loan and all  unpaid
         interest accrued thereon, together with all other fees, expenses, costs
         and other  sums  chargeable  to the  Requesting  Borrower  incurred  in
         connection  therewith  shall  be due and  payable  no  later  than  the
         Maturity  Date of such  Loan.  Each Loan  advanced  hereunder  shall be
         evidenced  by  the  Requesting  Borrower's  revolving  promissory  note
         substantially  in the form of Exhibits A-1 through  A-6, as  applicable
         (the "Notes").

                                 (ii) The obligation of Lenders to make any Loan
         from time to time  hereunder  shall be limited  to the then  applicable
         Maximum Availability.  For the purpose of determining the amount of the
         Borrowing Base available at any one time, the amount available shall be
         the total amount of the  Borrowing  Base as set forth in the  Borrowing
         Base  Certificate  delivered  to Agent  pursuant to Section  3.2.1 with
         respect to such  requested  Loan.  Nothing  contained in this Agreement
         shall  under any  circumstance  be deemed to require any Lender to make
         any  Advance  under the  Facility  which,  in the  aggregate  principal
         amount,  either (1) taking into  account such  Lender's  portion of the
         principal  amounts  outstanding  under this Agreement and the making of
         such Advance,  exceeds the lesser of (A) such Lender's  Commitment  for
         the  Facility and (B) such  Lender's  Pro Rata Share of the  Requesting
         Borrower's  Borrowing  Base,  or (2) taking into account such  Lender's
         portion  of the  aggregate  principal  amounts  outstanding  under this
         Agreement,  under the TEC AcquiSub  Agreement,  under the AFG Agreement
         and the making of such Advance,  exceeds such Lender's  Commitment  for
         the Facility.

                                 (iii)  If at any time  and for any  reason  the
         aggregate  principal  amount of the  Loan(s)  then  outstanding  to any
         Borrower shall exceed the Maximum  Availability  for such Borrower (the
         amount of such excess, if any, being an  "Overadvance"),  such Borrower
         shall immediately  repay the full amount of such Overadvance,  together
         with all interest  accrued  thereon;  provided,  however,  that if such
         Overadvance  occurs  solely as a result of a decrease  in the amount of
         the Borrowing  Base due solely to a decrease in the  computation of the
         Borrowing  Base under  clause  (b),  as set forth on a  Borrowing  Base
         Certificate  delivered to Agent pursuant to Section 5.1.3, then, to the
         extent of such decrease, such Borrower shall not be required under this
         Section 2.1.1(a)(iii) to prepay such Overadvance but Lenders shall have
         no  obligation  to make or fund  any  Loans  hereunder  so long as such
         Overadvance condition shall remain in effect.

                                 (iv) Amounts  borrowed by Borrowers  under this
         Facility may be repaid and,  prior to the Commitment  Termination  Date
         and  subject  to the  applicable  terms  and  conditions  precedent  to
         borrowings hereunder, reborrowed; provided, however, that no Loan shall
         have a Maturity  Date which is later  than the  Commitment  Termination
         Date and no LIBOR Loan shall have an Interest  Period  ending after the
         Maturity Date.

                                 (v) Each  request  for a Loan  hereunder  shall
         constitute  a  reaffirmation   by  the  Requesting   Borrower  and  the
         Responsible  Officer requesting the same that the  representations  and
         warranties  contained in this Agreement are true,  correct and complete
         in all material respects to the same extent as though made on and as of
         the date of the request,  except to the extent such representations and
         warranties  specifically relate to an earlier date, in which event they
         shall be true, correct and complete in all material respects as of such
         earlier date.

                           . Each Loan made by Lenders  hereunder  shall, at the
Requesting Borrower's option in accordance with the terms of this Agreement,  be
either in the form of a Prime  Rate Loan or a LIBOR  Loan.  Subject to the terms
and  conditions of this  Agreement,  each Loan shall bear interest on the sum of
the unpaid principal balance thereof  outstanding on each day from the date when
made,  continued or converted  until such Loan shall have been fully repaid at a
rate per annum equal to the Prime  Rate,  as the same may  fluctuate  on a daily
basis, or the Adjusted  LIBOR,  as the case may be, plus the Applicable  Margin.
Interest  on  each  Loan  funded  hereunder  shall  be due  and  payable  by the
Requesting  Borrower in arrears on each Interest  Payment Date, with all accrued
but unpaid  interest on such Loan being due and payable on the date such Loan is
repaid,  whether by prepayment  or at maturity,  and with all accrued but unpaid
interest being due and payable by the  Requesting  Borrower on the Maturity Date
for such Loan.

         Each  Advance  made by a  Lender  as part of a Loan  hereunder  and all
repayments  of  principal  with  respect to such  Advance  shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however,  that the failure by such Lender to make such notations shall not limit
or  otherwise  affect  the  obligations  of any  Borrower  with  respect  to the
repayments  of  principal  or payments  of interest on any Advance or Loan.  The
aggregate  unpaid amount of each Advance set forth on the books and records of a
Lender  shall be  presumptive  evidence of such  Lender's  Pro Rata Share of the
principal amount owing and unpaid by any Borrower under its Note.

                  . Promptly  following the receipt of such  documents  required
pursuant  to Section  3.2.1 and  approval  of a Loan by the Agent,  Agent  shall
notify by  telephone,  telecopier,  facsimile  or telex  each  Lender of the (a)
Requesting Borrower, (b) the principal amount (including Lender's Pro Rata Share
thereof) and (c) Funding Date of the Loan requested by such Requesting Borrower.
Not later than 1:00 p.m., North Carolina time, on the Funding Date for any Loan,
each  Lender  shall  make an  Advance  to Agent for the  account  of  Requesting
Borrower in the amount of its Pro Rata Share of the Loan being  requested.  Upon
satisfaction of the applicable  conditions precedent set forth in Section 3, all
Advances  shall be credited in  immediately  available  funds to the  Designated
Deposit Account.

                  . The Loans made under the Facility may be used solely for the
purpose of acquiring the specific items of Equipment.

         .        2         Repayment And Prepayment

                  . Unless  prepaid  pursuant to Section  2.2.2,  the  principal
amount of each Loan hereunder  made to a Requesting  Borrower shall be repaid by
the  Requesting  Borrower  to Lenders not later than the  Maturity  Date of such
Loan.

                  . Subject to Section  2.18,  any  Borrower may in the ordinary
course of such  Borrower's  business,  upon at least  three (3)  Business  Days'
written notice,  or telephonic  notice  promptly  confirmed in writing to Agent,
which notice  shall be  irrevocable,  prepay any Loan in whole or in part.  Such
notice of prepayment  shall specify the date and amount of such  prepayment  and
whether  such  prepayment  is of  Prime  Rate  Loans  or  LIBOR  Loans,  or  any
combination  thereof.  Such  prepayment  of  Loans,  together  with any  amounts
required  pursuant to Section 2.18, shall be in immediately  available funds and
delivered to Agent not later than 1:00 p.m.,  North  Carolina  time, on the date
for prepayment  stated in such notice (the "Prepayment  Date").  With respect to
any  prepayment  under this Section  2.2.2,  all interest on the amount  prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.

                  .        .3        Mandatory Prepayments

                                    (a) In the event  that any item of  Eligible
Inventory shall be sold or assigned by any Borrower or any Marine  Subsidiary of
such Borrower,  or the ownership  interests  (whether Stock or otherwise) of any
Borrower in any Marine  Subsidiary of such Borrower  owning record or beneficial
title to any item of Eligible Inventory shall be sold or transferred,  then such
Borrower  shall  immediately  prepay the Loan made with respect to such Eligible
Inventory so sold or assigned or with respect to the Eligible Inventory owned by
such  Marine  Subsidiary  so sold or  transferred,  together  with  any  accrued
interest  on  such  Loan to the  date of  prepayment  and any  amounts  required
pursuant to Section 2.18.  The sale or  assignment  of Eligible  Inventory by an
Owner  Trustee,  or the  sale or  assignment  of any  Borrower's  or any  Marine
Subsidiary's  beneficial interest in any owner trust (or nominee entity) holding
title to Eligible  Inventory,  shall be considered a sale or assignment,  as the
case  may be,  of  such  Eligible  Inventory  by such  Borrower  or such  Marine
Subsidiary, as the case may be.

                                    (b) In the  event  that any of the  Eligible
Inventory  shall have sustained a Casualty  Loss, the applicable  Borrower shall
promptly  notify Agent and Lenders of such Casualty  Loss and make  arrangements
reasonably  acceptable to the Agent to cause any and all cash proceeds  received
by such Borrower to be paid to Lenders as a prepayment hereunder.  To the extent
not so prepaid,  the Loan funded with respect to such  Eligible  Inventory  will
nevertheless be paid by such Borrower as provided in Section 2.2.1.

         . Interest on the Loans shall be computed on the basis of a 365/366-day
year for all Prime  Rate  Loans and a 360-day  year for all LIBOR  Loans and the
actual number of days elapsed in the period during which such interest  accrues.
In computing  interest on any Loan, the date of the making of such Loan shall be
included and the date of payment shall be excluded.  Each change in the interest
rate of Prime Rate Loans  based on changes in the Prime Rate and each  change in
the Adjusted LIBOR based on changes in the Eurodollar  Reserve  Percentage shall
be  effective  on the  effective  date of such  change and to the extent of such
change.  Agent shall give Borrowers notice of any such change in the Prime Rate;
provided,  however,  that any failure by Agent to provide  Borrowers with notice
hereunder shall not affect Agent's right to make changes in the interest rate of
any Loan based on changes in the Prime Rate.  Upon the occurrence and during the
continuation of any Event of Default under this  Agreement,  Advances under this
Agreement will, at the option of Requisite Lenders,  bear interest at a rate per
annum which is determined by adding two percent (2.00%) to the Applicable Margin
for such Loan (the  "Default  Rate").  This may  result  in the  compounding  of
interest.  The  imposition of a Default Rate will not constitute a waiver of any
Event of Default.

         . All  repayments  or  prepayments  of  principal  and all  payments of
interest,  fees,  costs,  expenses and other sums  chargeable to Borrowers under
this Agreement,  the Notes or any of the other Loan Documents shall be in lawful
money of the  United  States  of  America  in  immediately  available  funds and
delivered to Agent, for the account of Lenders,  not later than 1:00 p.m., North
Carolina time, on the date due at First Union  National Bank of North  Carolina,
One First Union Center,  301 South College  Street,  Charlotte,  North  Carolina
28288,  Attention:  Hannah  Carmody,  or such  other  place as shall  have  been
designated in writing by Agent.

         . Whenever any payment to be made under this Agreement, the Note or any
of the other  Loan  Documents  shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in the  computation of the
payment of interest thereon; provided, however, that no Loan shall have remained
outstanding after the Maturity Date of such Loan.

         . All  payments  to or for the  benefit of Lenders  hereunder  shall be
applied to the  Obligations  of any  Borrower  making  payment in the  following
order: (a) then due and payable fees as set forth in Section 2.1.1(a)(i) and, at
the  direction of such  Borrower or upon prior notice given to such  Borrower by
Agent,  other then due and payable  fees,  expenses and costs;  (b) then due and
payable  interest  payments  and  mandatory  prepayments;  and (c)  then due and
payable principal payments and optional  prepayments;  provided that if an Event
of  Default  shall  have  occurred  and be  continuing,  Lenders  shall have the
exclusive  right to apply  any and all such  payments  against  the then due and
owing Obligations of such Borrower as Lenders may deem advisable.  To the extent
any Borrower fails to make payment required  hereunder or under any of the other
Loan  Documents,  each Lender is authorized to, and at its sole option may, make
such payments on behalf of such  Borrower.  To the extent  permitted by law, all
amounts  advanced by any Lender  hereunder or under other provisions of the Loan
Documents shall accrue interest at the same rate as Loans hereunder.

         .        7         Procedure For The Borrowing Of Loans

                  . Each  borrowing  of Loans shall be made upon any  Requesting
Borrower's irrevocable written notice delivered to Agent in the form of a Notice
of Borrowing, executed by a Responsible Person of such Requesting Borrower, with
appropriate  insertions  (which  Notice of Borrowing  must be received by Lender
prior to 12:00 noon,  Charlotte,  North Carolina  time,  three (3) Business Days
prior to the requested Funding Date) specifying:

                        (a) the amount of the requested  borrowing,  which, if a
         LIBOR Loan is  requested,  shall be not less than One  Million  Dollars
         ($1,000,000);

                        (b)  the  requested  Funding  Date,  which  shall  be  a
         Business Day;

                        (c) whether the  borrowing  is to be comprised of one or
         more LIBOR Loans or Prime Rate Loans; and

                        (d) the duration of the Interest  Period  applicable  to
         any such LIBOR  Loans  included  in such  Notice of  Borrowing.  If the
         Notice of Borrowing  shall fail to specify the duration of the Interest
         Period for any borrowing comprised of LIBOR Loans, such Interest Period
         shall be three (3) months.

                  . Unless Agent shall otherwise  consent,  during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan made as a LIBOR Loan.

         .        8         Conversion And Continuation Elections

                  . Each Borrower may, upon irrevocable written notice to Agent:

                        (a) elect to convert on any Business Day, any Prime Rate
         Loan (or any portion thereof in an amount equal to at least One Million
         Dollars ($1,000,000)) into a LIBOR Loan; or

                        (b) elect to convert on any  Interest  Payment  Date any
         LIBOR Loan  maturing  on such  Interest  Payment  Date (or any  portion
         thereof) into a Prime Rate Loan; or

                        (c) elect to continue on any  Interest  Payment Date any
         LIBOR Loan  maturing  on such  Interest  Payment  Date (or any  portion
         thereof  in  an  amount   equal  to  at  least  One   Million   Dollars
         ($1,000,000));

provided,  that if the  aggregate  amount  of LIBOR  Loans  outstanding  to such
Borrower  shall have been  reduced,  by payment,  prepayment,  or  conversion of
portion  thereof,   to  be  less  than   $1,000,000,   such  LIBOR  Loans  shall
automatically  convert  into  Prime Rate  Loans,  and on and after such date the
right of such  Borrower to continue  such Loans as, and convert such Loans into,
LIBOR Loans shall terminate.

                  . Each  conversion or continuation of Loans shall be made upon
any Borrower's  irrevocable  written notice  delivered to Agent in the form of a
Notice of  Conversion/Continuation,  executed  by a  Responsible  Person of such
Borrower,  with appropriate insertions (which Notice of  Conversion/Continuation
must be received by Lender prior to 12:00 noon, Charlotte,  North Carolina time,
at least three (3) Business Days in advance of the proposed  conversion  date or
continuation date specifying:

                        (a) the proposed conversion date or continuation date;

                        (b) the  aggregate  amount of Loans to be  converted  or
         continued;

                        (c)  the   nature   of  the   proposed   conversion   or
         continuation; and

                        (d) the duration of the requested Interest Period.

                  . If upon the expiration of any Interest Period  applicable to
any LIBOR Loan,  the  Requesting  Borrower  has failed to select a new  Interest
Period to be  applicable to such LIBOR Loan,  such  Borrower  shall be deemed to
have elected to convert  such LIBOR Loan into a Prime Rate Loan  effective as of
the last day of such current Interest Period.

                  . Unless Agent shall otherwise  consent,  during the existence
of an Event of Default or Potential Event of Default, Borrowers may not elect to
have a Loan converted into or continued as a LIBOR Loan.

         . Notwithstanding any provision of this Agreement to the contrary, each
Lender  shall be entitled to fund and maintain its funding of all or any part of
its LIBOR Loans in any manner it elects, it being understood,  however, that for
the purposes of this Agreement all determinations  hereunder shall be made as if
such Lender  actually funded and maintained each LIBOR Loan through the purchase
of deposits  having a maturity  corresponding  to the maturity of the LIBOR Loan
and  bearing an  interest  rate equal to the LIBOR rate  (whether or not, in any
instance,  Lender  shall have  granted any  participations  in such Loan).  Each
Lender  may,  if it so elects,  fulfill  any  commitment  to make LIBOR Loans by
causing a foreign  branch or  affiliate  to make or continue  such LIBOR  Loans;
provided,  however,  that in such  event  such  Loans  shall be  deemed  for the
purposes of this Agreement to have been made by such Lender,  and the obligation
of Borrowers to repay such Loans shall  nevertheless be to such Lender and shall
be deemed held by such Lender,  to the extent of such Loans,  for the account of
such branch or affiliate.

         . Agent shall immediately distribute to each Lender, at such address as
each Lender shall  designate,  its  respective  interest in all  repayments  and
prepayments of principal and all payments of interest and all fees, expenses and
costs received by Agent on the same day and in the same type of funds as payment
was received.  In the event Agent does not distribute  such payments on the same
day  received,  if such  payments  are  received  by Agent by 1:00  p.m.,  North
Carolina time, or if received after such time, on the next  succeeding  Business
Day, such payment shall accrue interest at the Federal Funds Rate.

         . Unless Agent shall have been notified by any Lender no later than the
Business  Day prior to the  respective  Funding  Date of a Loan that such Lender
does not intend to make available to Agent an Advance in  immediately  available
funds equal to such  Lender's  Pro Rata Share of the total  principal  amount of
such Loan,  Agent may assume that such Lender has made such  Advance to Agent on
the date of the Loan and Agent  may,  in  reliance  upon such  assumption,  make
available to the Requesting Borrower a corresponding  Advance. If Agent has made
funds  available to such Borrower  based on such  assumption and such Advance is
not in fact made to Agent by such Lender, Agent shall be entitled to recover the
corresponding  amount of such Advance on demand from such Lender. If such Lender
does not promptly pay such corresponding amount upon Agent's demand, Agent shall
notify such Requesting  Borrower and such  Requesting  Borrower shall repay such
Advance to Agent.  Agent  also shall be  entitled  to recover  from such  Lender
interest on such  Advance in respect of each day from the date such  Advance was
made by Agent to such Requesting Borrower to the date such corresponding  amount
is  recovered by Agent at the Federal  Funds Rate.  Nothing in this Section 2.11
shall be deemed to  relieve  any  Lender  from its  obligation  to  fulfill  its
Commitment  or to prejudice any rights which Agent or such  Requesting  Borrower
may have  against  such Lender as a result of any  default by such Lender  under
this Agreement.

         . Unless Agent shall have been  notified by any  Borrower  prior to the
date on which any payment to be made by such Borrower hereunder is due that such
Borrower  does  not  intend  to  remit  such  payment,  Agent  may,  in its sole
discretion,  assume that such Borrower has remitted such payment when so due and
Agent may, in its sole  discretion  and in reliance upon such  assumption,  make
available to each Lender on such  payment date an amount equal to such  Lender's
Pro  Rata  Share  of such  assumed  payment.  If such  Borrower  has not in fact
remitted such payment to Agent,  each Lender shall  forthwith on demand repay to
Agent the amount of such assumed payment made available to such Lender, together
with  interest  thereon in respect of each date from and including the date such
amount was made  available  by Agent to such  Lender to the date such  amount is
repaid to Agent at the Federal Funds Rate.

         . If any Lender  determines  that compliance with any law or regulation
or with any  guideline or request  from any central  bank or other  Governmental
Authority  (whether or not having the force of law) has or would have the effect
of reducing the rate of return on the capital of such Lender or any  corporation
controlling such Lender as a consequence of, or with reference to, such Lender's
Commitment  or its making or  maintaining  its Pro Rata Share of the Loans below
the rate which such Lender or such other corporation could have achieved but for
such compliance  (taking into account the policies of such Lender or corporation
with regard to  capital),  then each  Borrower  shall,  from time to time,  upon
written demand by such Lender (with a copy of such demand to Agent), immediately
pay to such  Lender  (a) such  additional  amounts  as shall  be  sufficient  to
compensate such Lender or other  corporation  for such reduction  resulting from
such  Borrower's  Loans or (b) in the case where  such  reduction  results  from
compliance with any such law,  regulation,  guideline or request  affecting only
the  Commitments  and not  the  Loans,  such  additional  amounts  as  shall  be
sufficient to compensate  such Lender or other  corporation  for such  reduction
based on each Borrower's  percentage of average usage of the Commitments  versus
the total average usage by all Borrowers. A certificate submitted by such Lender
to any  Borrower,  stating  that the amounts set forth as payable to such Lender
are true and correct,  shall be conclusive and binding for all purposes,  absent
manifest error.  Each Lender agrees  promptly to notify  effected  Borrowers and
Agent of any  circumstances  that would  cause any  Borrower  to pay  additional
amounts pursuant to this section,  provided that the failure to give such notice
shall not affect Borrowers' obligation to pay any such additional amounts.

         .        14        Taxes

                  . Subject to Subsection  2.14.7,  any and all payments by each
Borrower  to each Lender or Agent  under this  Agreement  shall be made free and
clear of, and  without  deduction  or  withholding  for,  any and all present or
future taxes,  levies,  imposts,  deductions,  charges or withholdings,  and all
liabilities  with  respect  thereto,  excluding,  in the case of each Lender and
Agent,  such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income (all such  non-excluded  taxes,  levies,
imposts,  deductions,  charges,  withholdings and liabilities  being hereinafter
referred to as "Taxes").

                  . In addition, Borrowers shall pay any present or future stamp
or documentary  taxes or any other excise or property taxes,  charges or similar
levies  which  arise from any  payment  made  hereunder  or from the  execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Documents (hereinafter referred to as "Other Taxes").

                  . Subject to Subsection 2.14.7,  each Borrower shall indemnify
and hold  harmless  each  Lender and Agent for the full amount of Taxes or Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender or Agent in relation to any
payments made by or  Obligations  of such Borrower and any liability  (including
penalties,  interest,  additions to tax and expenses)  arising therefrom or with
respect  thereto,  whether or not such Taxes or Other  Taxes were  correctly  or
legally asserted. Payment under this indemnification shall be made within thirty
(30) days from the date any Lender or Agent makes written demand therefor.

                  . If any  Borrower  shall  be  required  by law to  deduct  or
withhold  any  Taxes  or  Other  Taxes  from or in  respect  of any sum  payable
hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:

                        (a) the sum payable  shall be  increased as necessary so
         that  after  making  all  required  deductions   (including  deductions
         applicable  to  additional  sums payable  under this Section 2.14) such
         Lender or Agent,  as the case may be,  receives an amount  equal to the
         sum it would have received had no such deductions been made;

                        (b) such Borrower shall make such deductions, and

                        (c) such Borrower shall pay the full amount  deducted to
         the relevant  taxation  authority or other authority in accordance with
         applicable law.

                  . Within thirty (30) days after the date of any payment by any
Borrower  of Taxes or Other  Taxes,  such  Borrower  shall  furnish to Agent the
original or a certified copy of a receipt evidencing  payment thereof,  or other
evidence of payment satisfactory to Agent.

                  . Each Lender which is a foreign  person (i.e., a person other
than a United  States  person for United  States  Federal  income tax  purposes)
shall:

                        (a) No later  than  the  date  upon  which  such  Lender
         becomes a party  hereto  deliver  to  Borrowers  through  Agent two (2)
         accurate  and  complete  signed  originals  of  IRS  Form  4224  or any
         successor  thereto ("Form 4224"),  or two accurate and complete  signed
         originals of IRS Form 1001 or any successor  thereto ("Form 1001"),  as
         appropriate, in each case indicating that such Lender is on the date of
         delivery thereof  entitled to receive  payments of principal,  interest
         and fees under this  Agreement  free from  withholding of United States
         Federal income tax;

                        (b)  If at  any  time  such  Lender  makes  any  changes
         necessitating a new Form 4224 or Form 1001, with reasonable  promptness
         deliver to Borrowers  through Agent in replacement  for, or in addition
         to, the forms  previously  delivered by it hereunder,  two accurate and
         complete  signed  originals of Form 4224;  or two accurate and complete
         signed originals of Form 1001, as appropriate,  in each case indicating
         that the Lender is on the date of delivery  thereof entitled to receive
         payments of principal, interest and fees under this Agreement free from
         withholding of United States Federal income tax;

                        (c) Before or promptly after the occurrence of any event
         (including  the passing of time but  excluding  any event  mentioned in
         (ii)  above)  requiring  a change in or renewal of the most recent Form
         4224 or Form 1001  previously  delivered  by such  Lender,  deliver  to
         Borrowers  through  Agent two  accurate and  complete  original  signed
         copies  of Form  4224  or  Form  1001  in  replacement  for  the  forms
         previously delivered by the Lender; and

                        (d) Promptly upon any  Borrower's or Agent's  reasonable
         request to that effect,  deliver to such Borrower or Agent (as the case
         may be) such other  forms or similar  documentation  as may be required
         from time to time by any applicable law, treaty,  rule or regulation in
         order to establish such Lender's tax status for withholding purposes.

                  . Borrowers will not be required to pay any additional amounts
in respect of United States Federal income tax pursuant to Subsection  2.14.4 to
Lender for the account of any Lending Office of such Lender:

                        (a) If the  obligation  to pay such  additional  amounts
         would not have  arisen but for a failure by such  Lender to comply with
         its  obligations  under  Subsection  2.14.6 in respect of such  Lending
         Office;

                        (b) If such Lender  shall have  delivered to Borrowers a
         Form 4224 in respect of such  Lending  Office  pursuant  to  Subsection
         2.14.6 and such Lender  shall not at any time be entitled to  exemption
         from  deduction or  withholding  of United States Federal income tax in
         respect of  payments  by  Borrowers  hereunder  for the account of such
         Lending  Office for any reason other than a change in United States law
         or  regulations  or in  the  official  interpretation  of  such  law or
         regulations   by  any   Governmental   Authority   charged   with   the
         interpretation  or  administration  thereof  (whether or not having the
         force of law) after the date of delivery of such Form 4224; or

                        (c) If such Lender  shall have  delivered to Borrowers a
         Form 1001 in respect of such  Lending  Office  pursuant  to  Subsection
         2.14.6,  and such Lender shall not at any time be entitled to exemption
         from  deduction or  withholding  of United States Federal income tax in
         respect of  payments  by  Borrowers  hereunder  for the account of such
         Lending  Office for any reason other than a change in United States law
         or  regulations  or any  applicable tax treaty or regulations or in the
         official  interpretation  of any such law, treaty or regulations by any
         Governmental    Authority   charged   with   the    interpretation   or
         administration  thereof  (whether or not having the force of law) after
         the date of delivery of such Form 1001.

                  . If, at any time, any Borrower requests any Lender to deliver
any forms or other  documentation  pursuant to Subsection  2.14.6(a),  then such
Borrower  shall,  on demand of such Lender through Agent,  reimburse such Lender
for any costs and  expenses  (including  reasonable  attorney  fees)  reasonably
incurred  by such Lender in the  preparation  or delivery of such forms or other
documentation.

                  . If any Borrower is required to pay additional amounts to any
Lender or Agent  pursuant to Subsection  2.14.4,  then such Lender shall use its
reasonable   good  faith   efforts   (consistent   with  legal  and   regulatory
restrictions)  to  change  the  jurisdiction  of  its  Lending  Office  so as to
eliminate  any such  additional  payment by such Borrower  which may  thereafter
accrue  if such  change,  in the  judgment  of  such  Lender,  is not  otherwise
disadvantageous to such Lender.

         .        15        Illegality

                  . If any Lender shall  determine that the  introduction of any
Requirement  of  Law,  or  any  change  in  any  Requirement  of  Law  or in the
interpretation  or  administration  thereof,  has made it unlawful,  or that any
central bank or other  Governmental  Authority has asserted that it is unlawful,
for such  Lender or its  Lending  Office to make LIBOR  Loans,  then,  on notice
thereof by Lender to the Requesting  Borrower,  the obligation of such Lender to
make LIBOR Loans shall be suspended  until such Lender  shall have  notified the
Requesting Borrower that the circumstances  giving rise to such determination no
longer exists.

                  . If a Lender shall  determine that it is unlawful to maintain
any LIBOR Loan,  Borrowers  shall  prepay in full all LIBOR Loans of such Lender
then outstanding, together with interest accrued thereon, either on the last day
of the Interest Period thereof if such Lender may lawfully  continue to maintain
such LIBOR Loans to such day, or  immediately,  if such Lender may not  lawfully
continue to maintain such LIBOR Loans,  together with any amounts required to be
paid in connection therewith pursuant to Section 2.18.

                  . If any  Borrower  is  required  to  prepay  any  LIBOR  Loan
immediately  as  provided  in  Section  2.2.3,   then   concurrently  with  such
prepayment,  such Borrower  shall borrow,  in the amount of such  prepayment,  a
Prime Rate Loan.

         .  If  any  Lender  shall   determine  that,  due  to  either  (a)  the
introduction  of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or
in the  interpretation  of any Requirement of Law or (b) the compliance with any
guideline  or request  from any  central  bank or other  Governmental  Authority
(whether  or not having the force of law),  there  shall be any  increase in the
cost to such Lender of agreeing to make or making,  funding or  maintaining  any
LIBOR Loans,  then  Borrowers  shall be liable on a joint and several basis for,
and shall from time to time,  upon demand  therefor by such Lender,  pay to such
Lender such  additional  amounts as are sufficient to compensate such Lender for
such increased costs.

         . If Agent  shall  have  determined  that for any reason  adequate  and
reasonable  means do not exist  for  ascertaining  the  LIBOR for any  requested
Interest  Period  with  respect  to a  proposed  LIBOR  Loan or that  the  LIBOR
applicable  for any requested  Interest  Period with respect to a proposed LIBOR
Loan does not  adequately and fairly reflect the cost to Lenders of funding such
Loan,  Agent will forthwith give notice of such  determination  to Borrowers and
each Lender.  Thereafter,  the  obligation of Lenders to make or maintain  LIBOR
Loans,  as the case may be,  hereunder  shall be  suspended  until  Agent,  upon
instruction from Requisite Lenders, revokes such notice in writing. Upon receipt
of such  notice,  Borrowers  may  revoke any  Notice of  Borrowing  or Notice of
Conversion/Continuation  then  submitted.  If a Borrower  does not  revoke  such
notice,  Lenders shall make,  convert or continue the Loans, as proposed by such
Borrower,  in the amount  specified in the applicable  notice  submitted by such
Borrower,  but such Loans shall be made,  converted  or  continued as Prime Rate
Loans instead of LIBOR Loans, as the case may be.

         . Each Borrower  agrees,  severally but not jointly,  that in the event
that  such  Borrower  prepays  or is  required  to  prepay  any  LIBOR  Loan  by
acceleration or otherwise or fails to draw down or convert to a LIBOR Loan after
giving notice thereof, it shall reimburse each Lender for its funding losses due
to such  prepayment or failure to draw.  Borrowers and Lenders hereby agree that
such  funding  losses  shall  consist  of  the  sum of  the  discounted  monthly
differences for each month during the applicable or requested  Interest  Period,
calculated as follows for each such month:

                           (a) Principal amount of such LIBOR Loan times (number
                  of days between the date of prepayment and the last day in the
                  applicable   Interest  Period  divided  by  360),   times  the
                  applicable Interest Differential, plus

                           (b) all actual  out-of-pocket  expenses  (other  than
                  those taken into  account in the  calculation  of the Interest
                  Differential)   incurred  by  Lenders  and  Agent   (excluding
                  allocation  of any expense  internal to Lenders and Agent) and
                  reasonably attributable to such payment, prepayment or failure
                  to draw down or convert as described  above;  provided that no
                  prepayment fee shall be payable (and no credit or rebate shall
                  be required) if the product of the foregoing  formula is not a
                  positive number.

 ..        CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE 
          MAKING OF LOANS

         . The effectiveness of this Agreement is subject to the satisfaction of
the following conditions precedent:

                  .  Agent   shall  have   received,   in  form  and   substance
satisfactory  to Lenders and their  respective  counsel a certified  copy of the
records of all actions taken by each Borrower and FSI, including all resolutions
of each Borrower and corporate  resolutions  of FSI,  authorizing or relating to
the  execution,  delivery and  performance  of this Agreement and the other Loan
Documents  and the  consummation  of the  transactions  contemplated  hereby and
thereby.

                  . Agent shall have  received new Notes,  in form and substance
satisfactory to Lenders, and duly executed and delivered by each Borrower, which
Notes  shall  replace  and  supersede  the Notes  issued by  Borrowers  to Agent
pursuant to the Growth Fund Agreement.

                  . Agent shall have received an originally  executed Opinion of
Counsel, in form and substance  satisfactory to Lenders, dated as of the Closing
Date and addressed to Lenders, together with copies of any officer's certificate
or legal  opinion  of other  counsel  or law firm  specifically  identified  and
expressly relied upon by such counsel.

                  . Agent shall have received the Reaffirmation of Guaranty,  in
form and substance satisfactory to Lenders, duly executed and delivered by FSI.

                  . Agent shall have received the TEC AcquiSub  Amendment,  duly
executed and  delivered by TEC  AcquiSub,  and all  conditions  precedent to the
effectiveness of the TEC AcquiSub Amendment shall have been satisfied.

                  . Agent shall have received the AFG  Agreement,  duly executed
and delivered by AFG, and all conditions  precedent to the  effectiveness of the
AFG Agreement shall have been satisfied.

                  . Separate certificates,  dated as of the Closing Date, of the
Chief Financial  Officer or Corporate  Controller of FSI, in its capacity as the
sole  general  partner of EGF III,  EGF IV, EGF V, EGF VI and EGF VII and as the
sole  manager of Income Fund I, to the effect that (i) the  representations  and
warranties  of each  Borrower  contained  in  Section 4 are true,  accurate  and
complete in all material  respects as of the Closing Date as though made on such
date and (ii) no Event of  Default  or  Potential  Event of  Default  under this
Agreement has occurred.

                  . Agent  shall have  received  the Fee Letter and the  Agent's
Side  Letter,  duly  executed  by  Borrowers,  TEC  AcquiSub  and  AFG,  and the
arrangement fee and the Agent's fee described in the Fee Letter and Agent's Side
Letter, respectively.

                  . Agent shall have received such other documents,  information
and items from Borrowers and FSI as reasonably requested by Agent.

         . Unless waived in writing by Requisite Lenders,  the obligation of any
Lender to make any  Advance  is  subject to the  satisfaction  of the  following
further conditions precedent:

                  . At least three (3) Business Days before each Loan  hereunder
with respect to any  acquisition of Equipment by any Borrower,  Agent shall have
received (i) Notice of Borrowing  and (ii) a Borrowing  Base  Certificate,  with
appropriate  insertions,  executed by the Chief  Financial  Officer or Corporate
Controller of such Borrower.

                  . No event  shall have  occurred  and be  continuing  or would
result from the making of any Loan on such  Funding  Date which  constitutes  an
Event of Default or  Potential  Event of Default  under this  Agreement or under
(and as  separately  defined  in) the TEC  AcquiSub  Agreement  or under (and as
separately defined in) the AFG Agreement,  or which with notice or lapse of time
or both would constitute an Event of Default or Potential Event of Default under
this Agreement or under the TEC AcquiSub Agreement or the AFG Agreement.

                  . All  representations  and  warranties  contained in the Loan
Documents shall be true, accurate and complete in all material respects with the
same effect as though such  representations  and warranties had been made on and
as of  such  Funding  Date  (except  to  the  extent  such  representations  and
warranties  specifically  relate to an earlier date, in which case they shall be
true, accurate and complete in all material respects as of such earlier date).

                  . The  insurance  required to be  maintained  by such Borrower
pursuant to the Loan Documents shall be in full force and effect.

                  .  Agent  shall  have  received  such  other  instruments  and
documents as it may have reasonably  requested from Borrowers in connection with
the Loans to be made on such date.

         . Notwithstanding anything to the contrary contained in this Agreement,
unless  waived  in  writing  by  Requisite  Lenders,  no Lender  shall  have any
obligation  hereunder to make any Advance if any of the  following  events shall
occur:

                  . FSI shall have ceased to be the sole general  partner of any
of EGF III,  EGF IV, EGF V, EGF VI or EGF VII or the sole manager of Income Fund
I, whether due to the voluntary or involuntary withdrawal, substitution, removal
or transfer of FSI from or of all or any  portion of FSI's  general  partnership
interest or capital contribution in such Borrower.

                  . Twenty five percent (25.0%) or more of the limited  partners
(measured by such partners'  percentage  interest) of any Equipment  Growth Fund
shall at any time vote to remove FSI as the  general  partner of such  Equipment
Growth  Fund or a  majority  in  interest  of Class A  members,  as that term is
defined in the Operating  Agreement,  of Income Fund I shall at any time vote to
remove FSI as manager of Income Fund I, in each case,  regardless of whether FSI
is actually removed.

                    Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall have ceased to be the purchaser of Eligible  Inventory for such Requesting
Borrower.

 .        4.        BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES

         . Each  Borrower,  severally,  as to itself,  but not jointly as to the
other Borrowers and FSI, and FSI, jointly and severally with each Borrower as to
each such Borrower and as to itself,  hereby  warrant and represent to Agent and
each  Lender  as  follows,   and  agree  that  each  of  said   warranties   and
representations   shall  be  deemed  to  continue   until  full,   complete  and
indefeasible  payment and performance of the Obligations and shall apply anew to
each borrowing hereunder:

                  . Each  Borrower is a limited  partnership  or, in the case of
Income Fund I, a limited liability company, and FSI is a corporation,  each duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its organization and is duly qualified and licensed as a foreign
corporation,  partnership  or limited  liability  company,  as  applicable,  and
authorized  to do business in each  jurisdiction  within the United States where
its  ownership  of  Property  and assets or conduct of  business  requires  such
qualification.  Each  Borrower and FSI has the power and  authority,  rights and
franchises to own their Property and assets and to carry on their  businesses as
now conducted.  Each Borrower and FSI has the power and authority to execute and
deliver the Loan Documents (to the extent each is a party thereto) and all other
instruments and documents contemplated hereby or thereby.

                  . The  execution,  delivery and  performance of this Agreement
and each of the  other  Loan  Documents  to which  any  Borrower  is a party and
delivery  and  payment  of  such  Borrower's  respective  Note  have  been  duly
authorized by all necessary and proper action on the part of such Borrower.  The
execution, delivery and performance of this Agreement and each of the other Loan
Documents to which FSI is a party have been duly authorized by all necessary and
proper  corporate  action  on the  part of FSI.  The Loan  Documents  constitute
legally valid and binding  obligations of each Borrower and FSI, as the case may
be, enforceable  against each Borrower and FSI, to the extent any one of them is
a  party  thereto,   in  accordance  with  their  respective  terms,  except  as
enforcement  thereof  may be limited  by  bankruptcy,  insolvency  or other laws
affecting the enforcement of creditors' rights generally.

                  .  (a)  The  execution,   delivery  and  performance  of  this
Agreement, and each of the other Loan Documents and the execution,  delivery and
payment of the Notes will not: (i) contravene any provision of FSI's certificate
of  incorporation  or bylaws;  (ii)  contravene  any provision of any Borrowers'
Limited  Partnership  Agreements  or,  in the case of Income  Fund I,  Operating
Agreement or other  formation or  organization  document;  or (iii)  contravene,
conflict with or violate any applicable law or regulation,  or any order,  writ,
judgment,  injunction,  decree,  determination  or  award  of  any  Governmental
Authority,  which contravention,  conflict or violation,  in the aggregate,  may
have  Material  Adverse  Effect;  and (b) the  execution  and  delivery  of this
Agreement,  and each of the other Loan  Documents and the execution and delivery
of the Notes  will not  violate  or result in the  breach  of, or  constitute  a
default  under  any  indenture  or  other  loan or  credit  agreement,  or other
agreement or instrument  which are, in the aggregate,  material and to which any
Borrower or FSI is a party or by which any Borrower,  FSI or their  Property and
assets may be bound or affected. Neither any Borrower nor FSI is in violation or
breach of or default under any law, rule,  regulation,  order,  writ,  judgment,
injunction,  decree,  determination or award or any contract,  agreement, lease,
license,  indenture or other instrument to which any one of them is a party, the
non-compliance  with,  the  violation  or breach of or the  default  under which
would, with reasonable likelihood, have a Material Adverse Effect.

                  . Each  Borrower's  and FSI's audited  consolidated  financial
statements  as  of  December  31,  1995  and  Borrowers'  and  FSI's   unaudited
consolidated  financial  statements  as of  March  31,  1996,  copies  of  which
heretofore have been delivered to Agent by such Borrower and FSI,  respectively,
and all other  financial  statements  and other data submitted in writing by any
Borrower  and FSI to Agent or any  Lender in  connection  with the  request  for
credit  granted  by this  Agreement,  are true,  accurate  and  complete  in all
material respects,  and said financial  statements and other data fairly present
the  consolidated  financial  condition of such Borrower and FSI, as of the date
thereof,  and have been  prepared  in  accordance  with GAAP,  subject to fiscal
year-end  audit  adjustments.  There has been no material  adverse change in the
business,  properties  or  assets,  operations,   prospects,   profitability  or
financial or other condition of any Borrower or FSI since March 31, 1996.

                  . The  current  location  of each  Borrower's  and FSI's chief
executive  offices  and  principal  places of  business is set forth on Schedule
4.1.5.

                  . Except as disclosed on Schedule 4.1.6,  there are no claims,
actions, suits,  proceedings or other litigation pending or, to the best of each
Borrower's  and FSI's  knowledge,  after due  inquiry,  threatened  against  any
Borrower, FSI or any of FSI's Subsidiaries,  including,  without limitation, TEC
AcquiSub, at law or in equity before any Governmental  Authority or, to the best
of each Borrower's and FSI's knowledge,  after due inquiry, any investigation by
any  Governmental  Authority  of  any  Borrower's  or  FSI's  or  any  of  FSI's
Subsidiaries',   including,   without  limitation,   TEC  AcquiSub's,   affairs,
Properties  or assets  which would,  with  reasonable  likelihood,  if adversely
determined, have a Material Adverse Effect. Other than any liability incident to
the litigation or proceedings disclosed on Schedule 4.1.6, neither any Borrower,
nor  FSI nor any of  FSI's  Subsidiaries,  including,  without  limitation,  TEC
AcquiSub, has any Contingent Obligations which are not provided for or disclosed
in the financial  statements  delivered to Agent  pursuant to Sections 4.1.4 and
5.1.

                  . Schedule 4.1.7 lists all currently  effective  contracts and
agreements (whether written or oral) to which each Borrower is a party and which
(i) could involve the payment or receipt by such Borrower after the date of this
Agreement  of  more  than  $250,000  or (ii)  otherwise  materially  affect  the
business,  operations  or financial  condition of any  Borrower  (the  "Material
Contracts").  Except as  disclosed  on  Schedule  4.1.7,  there are no  material
defaults under any such Material  Contract by any Borrower,  to the best of each
Borrower's  knowledge,  by any other party to any such Material  Contract.  Each
Borrower has delivered to Agent true and correct copies of all such contracts or
agreements   (or,  with  respect  to  oral  contracts  or  agreements,   written
descriptions of the material terms thereof).

                  . Except as set forth in  Schedule  4.1.8,  all  consents  and
approvals of, filings and  registrations  with, and other actions in respect of,
all Governmental Authorities required to be obtained by any Borrower, FSI or any
of  FSI's   Subsidiaries  in  order  to  make  or  consummate  the  transactions
contemplated  under  the Loan  Documents  have  been,  or prior to the time when
required will have been,  obtained,  given, filed or taken and are or will be in
full force and effect.

                  . Neither  any  Borrower,  FSI nor any of FSI's  Subsidiaries,
including,  without limitation,  TEC AcquiSub,  is a party to or is bound by any
agreement,  contract,  lease,  license  or  instrument,  or is  subject  to  any
restriction under its respective charter or formation  documents,  which has, or
is likely in the foreseeable future to have, a Material Adverse Effect.  Neither
any  Borrower  nor FSI has entered  into and,  as of the  Closing  Date does not
contemplate entering into, any material agreement or contract with any Affiliate
of any Borrower or FSI on terms that are less  favorable to such Borrower or FSI
than those  that might be  obtained  at the time from  Persons  who are not such
Affiliates.

                  . There are no collective bargaining agreements or other labor
agreements  covering  any  employees  of any  Borrower,  FSI  or  any  of  FSI's
Subsidiaries.

                  . No Borrower  has an Employee  Benefit Plan subject to ERISA.
All Pension Plans of FSI and any of FSI's Subsidiaries,  that are intended to be
qualified under Section 401(a) of the Code have been determined by the IRS to be
qualified  or FSI or any of FSI's  Subsidiaries  will obtain such  determination
prior to  instituting  such a Pension Plan. All Pension Plans existing as of the
date hereof  continue to be so qualified.  No "reportable  event" (as defined in
Section  4043 of ERISA)  has  occurred  and is  continuing  with  respect to any
Pension Plan for which the thirty-day notice requirement may not be waived other
than those of which the  appropriate  Governmental  Authority has been notified.
All  Employee  Benefit  Plans  of FSI or any of  FSI's  Subsidiaries  have  been
operated in all material  respects in accordance with their terms and applicable
law,  including ERISA, and no "prohibited  transaction" (as defined in ERISA and
the Code) that would  result in any  material  liability  to FSI or any of FSI's
Subsidiaries has occurred with respect to any such Employee Benefit Plan.

                  . There are no strikes or other  labor  disputes  against  any
Borrower,  FSI or any of FSI's  Subsidiaries  or, to the best of each Borrower's
and FSI's knowledge, after due inquiry,  threatened against any Borrower, FSI or
any of FSI's  Subsidiaries,  which would,  with  reasonable  likelihood,  have a
Material Adverse Effect. All payments due from any Borrower or FSI on account of
employee health and welfare insurance which would,  with reasonable  likelihood,
have a  Material  Adverse  Effect  if not paid  have  been  paid or, if not due,
accrued as a liability on the books of such Borrower or FSI.

                  . Neither any Borrower nor FSI own any "margin  security",  as
that term is defined in Regulations G and U of the Federal  Reserve  Board,  and
the  proceeds  of the  Loans  under  this  Agreement  will be used  only for the
purposes  contemplated  hereunder.  None of the Loans will be used,  directly or
indirectly,  for the purpose of purchasing or carrying any margin security,  for
the  purpose of  reducing  or retiring  any  indebtedness  which was  originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this  Agreement  to be  considered a "purpose
credit"  within the meaning of  Regulations  G, T, U and X. Neither any Borrower
nor FSI will take or permit  any agent  acting on its  behalf to take any action
which  might  cause this  Agreement  or any  document  or  instrument  delivered
pursuant hereto to violate any regulation of the Federal Reserve Board.

                  . All federal,  state, local and foreign tax returns,  reports
and  statements  required to be filed by any  Borrower,  FSI and, to the best of
each  Borrower's  and  FSI's  knowledge,  after  due  inquiry,  by any of  FSI's
Subsidiaries have been filed with the appropriate Governmental Authorities where
failure to file  would,  with  reasonable  likelihood,  have a Material  Adverse
Effect,  and all material Charges and other  impositions shown thereon to be due
and payable by any Borrower,  FSI or such Subsidiary have been paid prior to the
date on which any fine,  penalty,  interest or late charge may be added  thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid,  or such  Borrower,  FSI or such  Subsidiary  is  contesting  its
liability  therefore  in good  faith and has  fully  reserved  all such  amounts
according  to GAAP in the  financial  statements  provided to Agent  pursuant to
Section 5.1. Each  Borrower,  FSI and, to the best of each  Borrower's and FSI's
knowledge,  after due inquiry,  each of FSI's Subsidiaries has paid when due and
payable  all  material  Charges  upon  the  books of any  Borrower,  FSI or such
Subsidiary  and no  Government  Authority  has  asserted  any Lien  against  any
Borrower,  FSI or any of FSI's  Subsidiaries  with  respect  to unpaid  Charges.
Proper and accurate amounts have been withheld by each Borrower, FSI and, to the
best of each Borrower's and FSI's  knowledge,  after due inquiry,  each of FSI's
Subsidiaries from its employees for all periods in full and complete  compliance
with the  tax,  social  security  and  unemployment  withholding  provisions  of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities.

                  .        .15       Environmental Quality

                        (a) Except as specifically disclosed in Schedule 4.1.15,
the on-going  operations of each  Borrower,  FSI and each of FSI's  Subsidiaries
comply  in all  material  respects  with all  Environmental  Laws,  except  such
non-compliance  which would not (if enforced in accordance  with applicable law)
result in liability in excess of $250,000 in the aggregate.

                        (b) Except as specifically disclosed in Schedule 4.1.15,
each  Borrower,  FSI and each of FSI's  Subsidiaries  has obtained all licenses,
permits,  authorizations and registrations  required under any Environmental Law
("Environmental Permits") and necessary for its ordinary course operations,  all
such Environmental Permits are in good standing, and each Borrower, FSI and each
of FSI's Subsidiaries is in compliance with all material terms and conditions of
such Environmental Permits.

                        (c) Except as specifically disclosed in Schedule 4.1.15,
neither  any  Borrower,  FSI or any  of  FSI's  Subsidiaries  nor  any of  their
respective present Property or operations is subject to any outstanding  written
order from or  agreement  with any  Governmental  Authority  nor  subject to any
judicial or docketed  administrative  proceeding,  respecting any  Environmental
Law, Environmental Claim or Hazardous Material.

                        (d) Except as specifically disclosed in Schedule 4.1.15,
there are no Hazardous  Materials or other conditions or circumstances  existing
with respect to any Property,  or arising from  operations  prior to the Closing
Date, of any Borrower, FSI or any of FSI's Subsidiaries that would reasonably be
expected to give rise to Environmental  Claims with a potential liability of any
Borrower,  FSI or  any of  FSI's  Subsidiaries  in  excess  of  $250,000  in the
aggregate for any such condition, circumstance or Property.

                  . Each  Borrower and FSI and, to the best of their  knowledge,
after due inquiry,  each of FSI's  Subsidiaries  possess and owns all  necessary
trademarks,  trade names,  copyrights,  patents,  patent rights,  franchises and
licenses which are material to the conduct of their business as now operated.

                  . As of the Closing  Date,  no  information  contained in this
Agreement,  the other Loan Documents or any other documents or written materials
furnished by or on behalf of any Borrower or FSI to Agent or any Lender pursuant
to the terms of this Agreement or any of the other Loan  Documents  contains any
untrue or  inaccurate  statement of a material fact or omits to state a material
fact necessary to make the statement  contained herein or therein not misleading
in light of the circumstances under which made.

                  .  Neither  any  Borrower  nor FSI is:  (a) a "public  utility
company" or a "holding company," or an "affiliate" or a "subsidiary  company" of
a "holding  company," or an "affiliate" of such a "subsidiary  company," as such
terms  are  defined  in  the  Public  Utility  Holding  Company  Act  or  (b) an
"investment  company,"  or  an  "affiliated  person"  of,  or  a  "promoter"  or
"principal  underwriter" for, an "investment company," as such terms are defined
in the  Investment  Company  Act.  The  making  of the Loans  hereunder  and the
application  of the  proceeds  and  repayment  thereof by each  Borrower and the
performance  of the  transactions  contemplated  by this Agreement and the other
Loan Documents  will not violate any provision of the Investment  Company Act or
the Public Utility Holding Company Act, or any rule,  regulation or order issued
by the SEC thereunder.

                  .  Each Borrower and FSI are Solvent.

         . At the time any  Borrower  makes a request  for an initial  borrowing
hereunder,  each such Borrower,  severally,  as to itself, but not jointly as to
the other  Borrowers and FSI, and FSI,  jointly and severally with each Borrower
as to each such Borrower and as to itself, hereby warrant and represent to Agent
and  each  Lender  as  follows,  and  agree  that  each of said  warranties  and
representations   shall  be  deemed  to  continue   until  full,   complete  and
indefeasible  payment and performance of the Obligations and shall apply anew to
each additional borrowing hereunder:

                  . Each Borrower and FSI has the power and authority to perform
the terms of the Loan  Documents (to the extent each is a party thereto) and all
other instruments and documents contemplated hereby or thereby.

                  . The  performance  of this  Agreement,  and each of the other
Loan  Documents  and the  payment of the Notes will not violate or result in the
breach of, or  constitute a default  under any indenture or other loan or credit
agreement,  or other  agreement  or  instrument  which  are,  in the  aggregate,
material and to which any  Borrower or FSI is a party or by which any  Borrower,
FSI or their Property and assets may be bound or affected.

                  . No  approval,  authorization  or consent  of any  trustee or
holder of any  indebtedness or obligation of any Borrower or FSI or of any other
Person under any such material agreement,  contract, lease or license or similar
document or instrument to which such Borrower,  FSI or any of FSI's Subsidiaries
is a party or by which such Borrower,  FSI or any such  Subsidiary is bound,  is
required to be  obtained by any such  Borrower,  FSI or any such  Subsidiary  in
order  to make or  consummate  the  transactions  contemplated  under  the  Loan
Documents.

         . So  long as any of the  Commitments  shall  be  available  and  until
payment and  performance in full of the  Obligations,  the  representations  and
warranties  contained herein shall have a continuing  effect as having been true
when made.

 .        5.        BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS

         Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI,  jointly and severally with each Borrower as to each
Borrower and as to itself (and, where applicable, PLMI) covenant and agree that,
so long as any of the  Commitments  shall be available and until full,  complete
and indefeasible  payment and performance of the  Obligations,  unless Requisite
Lenders shall  otherwise  consent in writing,  each Borrower and FSI shall do or
cause to have done all of the following:

         . Maintain,  and cause each of FSI's Subsidiaries to maintain, a system
of accounting administered in accordance with sound business practices to permit
preparation  of financial  statements  in conformity  with GAAP,  and deliver to
Agent or caused to be delivered to Agent:

                  . As soon as  practicable  and in any event  within sixty (60)
days after the end of each quarterly accounting period of each Borrower, FSI and
PLMI,  except with respect to the final fiscal  quarter of each fiscal year,  in
which case as soon as  practicable  and in any event  within one hundred  twenty
(120) days after the end of such fiscal quarter,  consolidated and consolidating
balance  sheets of FSI and PLMI and a balance  sheet of each  Borrower as at the
end of such period and the related consolidated (and, as to statements of income
only for FSI, consolidating)  statements of income and stockholders' or members'
equity of each  Borrower  and FSI and the  related  consolidated  statements  of
income,  stockholders'  or  members'  equity and cash flows of PLMI (and,  as to
statements of income only,  consolidating) for such quarterly accounting period,
setting forth in each case in comparative form the consolidated  figures for the
corresponding  periods  of the  previous  year,  all in  reasonable  detail  and
certified by the Chief Financial Officer or Corporate  Controller of the general
partner or manager of each Borrower,  as applicable,  FSI and PLMI that they (i)
are complete and fairly present the financial  condition of such  Borrower,  FSI
and PLMI as at the dates  indicated  and the  results  of their  operations  and
changes  in their  cash  flow  for the  periods  indicated,  (ii)  disclose  all
liabilities of each Borrower,  FSI and PLMI that are required to be reflected or
reserved  against  under GAAP,  whether  liquidated  or  unliquidated,  fixed or
contingent  and (iii) have been  prepared in  accordance  with GAAP,  subject to
changes resulting from audit and normal year-end adjustment;

                  . As soon as  practicable  and in any event within one hundred
twenty  (120) days after the end of each fiscal year of each  Borrower,  FSI and
PLMI,  consolidated  and  consolidating  balance  sheets  of FSI and  PLMI and a
balance  sheet  of each  Borrower  as at the end of such  year  and the  related
consolidated   (and,  as  to  statements  of  income  only  for  FSI  and  PLMI,
consolidating)  statements of income,  stockholders' or members' equity and cash
flows of each  Borrower,  if  applicable,  FSI and PLMI  for such  fiscal  year,
setting forth in each case, in comparative form the consolidated figures for the
previous year, all in reasonable detail and (i) in the case of such consolidated
financial  statements,  accompanied by a report thereon of an independent public
accountant of recognized  national standing  selected by each Borrower,  FSI and
PLMI and  satisfactory to Agent,  which report shall contain an opinion which is
not  qualified  in any manner or which  otherwise is  satisfactory  to Requisite
Lenders,  in their sole discretion,  and (ii) in the case of such  consolidating
financial  statements,  certified  by the Chief  Financial  Officer or Corporate
Controller of FSI and PLMI;

                  . As soon as  practicable,  and in any event  not  later  than
fifteen (15) days after the end of each calendar month in which a Loan has been,
or is,  outstanding,  a Borrowing Base  Certificate  dated as of the last day of
such month, duly executed by a Chief Financial  Officer or Corporate  Controller
of the general partner or manager of each Borrower, with appropriate insertions;

                  . As soon as  practicable,  and in any event  not  later  than
forty-five  (45) days after the end of each fiscal quarter of each  Borrower,  a
Compliance  Certificate  dated as of the last day of such  fiscal  quarter,  and
executed by the Chief Financial  Officer or Corporate  Controller of the general
partner or manager of such Borrower, with appropriate insertions.

                  . At Agent's request, promptly upon receipt thereof, copies of
all  reports  submitted  to each  Borrower,  FSI or PLMI by  independent  public
accountants  in  connection  with each annual,  interim or special  audit of the
financial statements of such Borrower, FSI or PLMI made by such accountants;

                  . (i) On the  date  six  months  after  the  Closing  Date and
thereafter upon Agent's reasonable request,  which request will not be made more
than once  during any  calendar  year  (unless  an Event of  Default  shall have
occurred and be continuing),  a report from each Borrower's insurance broker, in
such detail as Agent may reasonably request,  as to the insurance  maintained or
caused  to  be  maintained  by  each  Borrower   pursuant  to  this   Agreement,
demonstrating  compliance with the requirements hereof and thereof,  and (ii) as
soon as  possible  and in no event  later  than  fifteen  (15) days prior to the
expiration date of any insurance policy of any Borrower,  a written confirmation
that such policy is in process of renewal and is not  terminated or subject to a
notice of non-renewal from such Borrower's insurance broker; provided,  however,
that such Borrower shall give Agent prompt  written notice if changes  affecting
risk coverage will be made to such policy or if the policy will be terminated;

                  . Promptly  upon any officer of any Borrower or FSI  obtaining
knowledge (a) of any condition or event which constitutes an Event of Default or
Potential Event of Default under this  Agreement,  (b) that any Person has given
any notice to any  Borrower,  FSI,  TEC, TEC AcquiSub or PLMI or taken any other
action  with  respect  to a claimed  default or event or  condition  of the type
referred to in Section 8.1.2, (c) of the institution of any litigation or of the
receipt of written notice from any Governmental Authority as to the commencement
of any formal  investigation  involving an alleged or asserted  liability of any
Borrower,  FSI,  TEC, TEC AcquiSub or PLMI equal to or greater than  $500,000 or
any adverse  judgment in any litigation  involving a potential  liability of any
Borrower,  FSI, TEC, TEC AcquiSub or PLMI equal to or greater than $500,000,  or
(d) of a material adverse change in the business, operations, properties, assets
or condition (financial or otherwise) of any Borrower, FSI, TEC, TEC AcquiSub or
PLMI,  a  certificate  of a  Responsible  Officer  of any  Borrower  or FSI,  as
applicable,  specifying  the notice given or action taken by such Person and the
nature of such claimed  default,  Event of Default,  Potential Event of Default,
event or condition and what action such Borrower, FSI, TEC, TEC AcquiSub or PLMI
has taken, is taking and proposes to take with respect thereto;

                  . Promptly  upon becoming  aware of the  occurrence of any (a)
Termination  Event  in  connection  with  any  Pension  Plan or (b)  "prohibited
transaction"  (as such term is defined in ERISA and the Code) in connection with
any Employee  Benefit Plan or any trust  created  thereunder,  a written  notice
specifying  the nature  thereof,  what  action any  Borrower or any of its ERISA
Affiliates has taken, is taking or proposes to take with respect  thereto,  and,
when known,  any action taken or  threatened by the IRS or the PBGC with respect
thereto;

                  .  With  reasonable  promptness,  copies  of (a)  all  notices
received by any Borrower,  FSI, any of FSI's  Subsidiaries or any of their ERISA
Affiliates  of the PBGC's  intent to  terminate  any  Pension  Plan or to have a
trustee appointed to administer any Pension Plan, (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Borrower, FSI,
any of FSI's  Subsidiaries  or any of their ERISA  Affiliates  with the IRS with
respect to each Pension Plan covering  employees of any Borrower,  FSI or any of
FSI's  Subsidiaries,  and (c) all notices received by any Borrower,  FSI, any of
FSI's  Subsidiaries or any of their ERISA  Affiliates from a Multiemployer  Plan
sponsor concerning the imposition or amount of withdrawal  liability pursuant to
Section 4202 of ERISA;

                  . Promptly upon receipt by any  Borrower,  FSI or any of FSI's
Subsidiaries, any challenge by the IRS to the qualification under Section 401 or
501 of the Code of any Pension Plan;

                  . As soon as  available  and in no event  later  than five (5)
days  after the same shall have been filed with the SEC, a copy of each Form 8-K
Current  Report,  Form 10-K Annual Report,  Form 10-Q Quarterly  Report,  Annual
Report to  Shareholders,  Proxy  Statement  and  Registration  Statement  of any
Borrower and PLMI;

                  . Upon the  request of Agent,  copies of all  federal,  state,
local and foreign tax  returns  and reports in respect of income,  franchise  or
other taxes on or measured by income  (excluding sales, use or like taxes) filed
by or on behalf of any Borrower and FSI; and

                  .  Such  other   information   respecting   the  condition  or
operations,   financial  or  otherwise,   of  any  Borrower  and  PLMI  and  its
Subsidiaries  as Agent or any Lender may from time to time  reasonably  request,
and such  information  regarding  the lessees  under Leases as any Borrower from
time to time receives or Agent or any Lender reasonably requests.

         All financial statements of Borrowers,  FSI and PLMI to be delivered by
any Borrower and FSI to Agent  pursuant to this Section 5.1 will be complete and
correct and present  fairly the financial  condition of each  Borrower,  FSI and
PLMI as of the date thereof; will disclose all liabilities of each Borrower, FSI
and PLMI that are  required  to be  reflected  or reserved  against  under GAAP,
whether  liquidated or  unliquidated,  fixed or  contingent;  and will have been
prepared  in  accordance  with  GAAP.  All tax  returns  submitted  to  Agent by
Borrowers  and FSI will,  to the best of each  Borrower's  and FSI's  knowledge,
after due inquiry, be true and correct.  Each Borrower and FSI hereby agree that
each time any one of them submits a financial  statement or tax return to Agent,
such  Borrower and FSI shall be deemed to represent  and warrant to Lenders that
such  financial  statement  or tax  return  complies  with all of the  preceding
requirements set forth in this paragraph.

         . Each  Borrower  and FSI shall  preserve and  maintain,  and FSI shall
cause each of FSI's Subsidiaries,  including,  without limitation, TEC AcquiSub,
to preserve and maintain,  their existence and all of their  licenses,  permits,
governmental approvals, rights, privileges and franchises necessary or desirable
in the normal conduct of their businesses as now conducted or presently proposed
to be  conducted  (including,  without  limitation,  their  qualification  to do
business  in each  jurisdiction  in which such  qualification  is  necessary  or
desirable  in  view  of  its  business);   conduct,  and  cause  each  of  FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, and any Owner Trustee
to conduct, its business in an orderly and regular manner; and comply, and cause
each of FSI's Subsidiaries, including, without limitation, TEC AcquiSub, and any
Owner Trustee, to comply,  with (a) as to any Borrower,  its Limited Partnership
Agreement,   Operating  Agreement  and  other   organizational   documents,   as
applicable,  and as to FSI and  each  of its  Subsidiaries,  including,  without
limitation,  TEC AcquiSub,  the  provisions  of its  respective  certificate  or
articles of incorporation, as applicable, and bylaws and (b) the requirements of
all applicable laws, rules,  regulations or orders of any Governmental Authority
and  requirements  for  the  maintenance  of  any  Borrower's,   FSI's  or  such
Subsidiary's  insurance,  licenses,  permits,  governmental  approvals,  rights,
privileges  and  franchises,  except,  in either  case,  to the extent  that the
failure  to comply  therewith  would  not,  in the  aggregate,  with  reasonable
likelihood, have a Material Adverse Effect.

         . Each  Borrower and FSI shall  maintain  and keep in force,  and cause
each of FSI's  Subsidiaries,  including,  without limitation,  TEC AcquiSub,  to
maintain  and  keep  in  force  insurance  of  the  types  and in  amounts  then
customarily  carried in lines of business  similar to that of Borrowers,  FSI or
any of FSI's  Subsidiaries  as the case may be,  including,  but not limited to,
fire, extended coverage, public liability, property damage, environmental hazard
and workers'  compensation,  in each case carried with financially sound Persons
and  in  amounts  satisfactory  to  Requisite  Lenders  (subject  to  commercial
reasonableness as to each type of insurance);  provided, however, that the types
and amounts of  insurance  shall not provide any less  coverage for any Borrower
than  provided  as of the  Closing  Date by the  existing  blanket  policies  of
insurance  for PLMI and its  Subsidiaries.  All such  policies  as to  liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured and, upon the reasonable request of Agent, all such policies of property
insurance  shall carry  endorsements  naming Agent as principal loss payee as to
any  property  owned by  Borrowers  and  financed by  Lenders,  and in each case
indicating that (a) any loss thereunder shall be payable to Agent or Lenders, as
the  case  may  be,   notwithstanding   any   action,   inaction  or  breach  of
representation  or  warranty  by any  Borrower  or FSI;  (b)  there  shall be no
recourse  against  any Lender for  payment of  premiums  or other  amounts  with
respect  thereto,  and (c) at least fifteen (15) days' prior  written  notice of
cancellation,  lapse or material  change in coverage  shall be given to Agent by
the insurer.

         .  Promptly  pay and  discharge  and cause each of FSI's  Subsidiaries,
including,  without limitation, TEC AcquiSub,  promptly to pay and discharge all
material Charges when due and payable, except (a) such as may be paid thereafter
without  penalty or (b) such as may be  contested  in good faith by  appropriate
proceedings  and for  which an  adequate  reserve  has been  established  and is
maintained in accordance  with GAAP. Each Borrower and FSI shall promptly notify
Agent of any material challenge, contest or proceeding pending by or against any
Borrower, FSI and PLMI or any of FSI's Subsidiaries before any taxing authority.

         . At any reasonable  time and from time to time during normal  business
hours,  permit  Agent or any Lender or any  agent,  representative  or  employee
thereof,  to examine and make copies of and abstracts from the financial records
and  books  of  account  of each  Borrower,  FSI or any of  FSI's  Subsidiaries,
including,  without  limitation,  TEC  AcquiSub,  and  other  documents  in  the
possession  or  under  the  control  of  any  Borrower,  FSI  or  any  of  FSI's
Subsidiaries,  including,  without  limitation,  TEC  AcquiSub,  relating to any
obligation  of any  Borrower  or FSI  arising  under  or  contemplated  by  this
Agreement  and to visit  the  offices  of any  Borrower  or FSI to  discuss  the
affairs,  finances  and accounts of any Borrower or FSI with any of the officers
of any Borrower or FSI, and, upon  reasonable  notice and during normal business
hours  (unless  an Event of  Default or  Potential  Event of Default  shall have
occurred and be  continuing,  in which event no notice is required),  to conduct
audits of and appraise Equipment. Such audits and appraisals shall be subject to
the lessee's right to quiet enjoyment as set forth in the respective lease.

         .        6         Maintenance Of Facilities; Modifications

                  . Each  Borrower  and FSI shall  keep and cause  each of FSI's
Subsidiaries, including, without limitation, TEC AcquiSub, to keep, all of their
respective Properties which are useful or necessary to such Borrower's, FSI's or
such Subsidiary's  business, in good repair and condition,  normal wear and tear
excepted,  and from time to time make,  and cause each such  Subsidiary  to make
necessary  repairs thereto,  and renewals and replacements  thereof so that each
Borrower's, FSI's or such Subsidiary's Properties shall be fully and efficiently
preserved and maintained.

                  .  Subject  to  Section  5.6.1,  each  Borrower  and FSI shall
promptly make, or cause to be made, all modifications, additions and adjustments
to the  Eligible  Inventory  as  may  from  time  to  time  be  required  by any
Governmental  Authority having  jurisdiction  over the operation,  safety or use
thereof.

         . From  time  to time as may be  necessary  (in  the  event  that  such
information  is not otherwise  delivered by Borrowers or FSI to Agent or Lenders
pursuant  to this  Agreement),  so long as  there  are  Obligations  outstanding
hereunder,  disclose to Agent in writing any material matter  hereafter  arising
which, if existing or occurring at the date of this  Agreement,  would have been
required to be set forth or described  by any Borrower or FSI in this  Agreement
or any of the other Loan Documents  (including all Schedules and Exhibits hereto
or  thereto)  or which is  necessary  to correct  any  information  set forth or
described by Borrowers or FSI hereunder or thereunder or in connection  herewith
which has been rendered inaccurate thereby.

         . In addition to the  obligations  and documents  which this  Agreement
expressly  requires  Borrowers  or FSI to  execute,  deliver and  perform,  each
Borrower  or FSI shall  execute,  deliver  and  perform,  and shall  cause FSI's
Subsidiaries  to execute,  deliver  and  perform,  any and all  further  acts or
documents  which  Agent or Lenders  may  reasonably  require to  effectuate  the
purposes of this Agreement or any of the other Loan Documents.

         . Each Borrower shall,  unless otherwise  directed in writing by Agent,
cause all  remittances  made by the obligor under any Lease to be made to a lock
box (the  "Lockbox")  maintained  with FUNB  pursuant to the Lockbox  Agreement.
Unless  otherwise  directed  by  Agent  in  writing,   all  invoices  and  other
instructions submitted by any Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.

         .  Each  Borrower  and  FSI  shall,  and FSI  shall  cause  each of its
Subsidiaries  to,  conduct its  operations and keep and maintain its Property in
material compliance with all Environmental Laws.

 .        6.        BORROWER'S AND FSI'S NEGATIVE COVENANTS

         So long as any of the  Commitments  shall be available  and until full,
complete and  indefeasible  payment and performance of the  Obligations,  unless
Requisite Lenders shall otherwise consent in writing, each Borrower,  severally,
as to  itself,  but not  jointly  as to the other  Borrowers  and FSI,  and FSI,
jointly and  severally  with each  Borrower as to such  Borrower  and to itself,
covenant and agree as follows:

         . Each  Borrower and FSI shall not create,  incur,  assume or suffer to
exist,  and shall not permit any Marine  Subsidiary  of such  Borrower  or Owner
Trustee  holding  record  title to any  Eligible  Inventory  for the  beneficial
interest of such  Borrower or FSI to create,  incur,  assume or suffer to exist,
and FSI shall not permit any of its Subsidiaries (including, without limitation,
TEC and TEC AcquiSub) to create,  incur,  assume or suffer to exist, any Lien of
any nature upon or with respect to any of their respective Property, whether now
or hereafter owned,  leased or acquired,  except  (collectively,  the "Permitted
Liens"):

                           .1 Existing Liens disclosed on Schedule 6.1, provided
that the obligations secured thereby are not increased;

                           .2 Liens for Charges if payment shall not at the time
be required to be made in accordance with Section 5.4;

                           .3  Liens  in  respect  of  pledges,  obligations  or
deposits (a) under workers' compensation laws,  unemployment insurance and other
types of social security or similar legislation,  (b) in connection with surety,
appeal  and  similar  bonds  incidental  to the  conduct of  litigation,  (c) in
connection with bid, performance or similar bonds and mechanics',  laborers' and
materialmen's and similar statutory Liens not then delinquent, or (d) incidental
to the conduct of the business of such Borrower,  any Marine  Subsidiary of such
Borrower,  FSI or any Owner Trustee or any of FSI's  Subsidiaries and which were
not  incurred in  connection  with the  borrowing  of money or the  obtaining of
advances or credit;  provided that the Liens  permitted by this Section 6.1.3 do
not in the aggregate materially detract from the value of any assets or property
of or materially impair the use thereof in the operation of the business of such
Borrower,  FSI or any Owner Trustee or any of FSI's  Subsidiaries;  and provided
further that the adverse determination of any claim or liability,  contingent or
otherwise,  secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;

                           .4        Permitted Rights of Others; and

                           .5 Liens  granted  in favor  of  Agent on  behalf  of
Lenders under the TEC AcquiSub  Agreement  and the security  agreement and other
loan documents delivered by TEC AcquiSub pursuant thereto.

         . Each Borrower  shall not, and shall not permit any Marine  Subsidiary
of such  Borrower to, and FSI shall not permit TEC and TEC AcquiSub to, make any
Acquisition or enter into any agreement to make any Acquisition, other than with
respect to the purchase of  Equipment in the ordinary  course of business or the
formation or acquisition of a Marine Subsidiary.

         . Each  Borrower and FSI shall not create,  incur,  assume or suffer to
exist,  nor permit any  Marine  Subsidiary  of such  Borrower  or Owner  Trustee
holding record title to any Eligible  Inventory for the  beneficial  interest of
such Borrower or FSI to create,  incur, assume or suffer to exist, and FSI shall
not permit any of its Subsidiaries (including,  without limitation,  TEC and TEC
AcquiSub)  to create,  incur,  assume or suffer to exist,  any  Indebtedness  or
Contingent  Obligation;  provided,  however,  that this Section 6.3 shall not be
deemed to prohibit:

                           .1 The  Obligations  to  Lenders  and  Agent  arising
hereunder and under the other Loan Documents;

                           .2 Existing Indebtedness disclosed on Schedule 6.3(a)
and anticipated Indebtedness disclosed on Schedule 6.3(b);

                           .3  Indebtedness  of any Subsidiary of FSI,  provided
that such Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;

                           .4 The acquisition of goods,  supplies or merchandise
on normal trade credit;

                           .5 The endorsement of negotiable instruments received
in the ordinary course of any Borrower's business as presently conducted;

                           .6  Indebtedness  incurred in respect of the deferred
purchase  price  for an item of  Equipment,  but  only to the  extent  that  the
incurrence of such Indebtedness is customary in the industry with respect to the
purchase of this type of equipment  (provided that such Indebtedness  shall only
be permitted  under this clause (d) if,  taking into account the  incurrence  of
such  Indebtedness,  the Borrower  incurring such  Indebtedness  shall not be in
violation of any of the  financial  covenants set forth in Section 7 if measured
as of the date of incurrence as determined by GAAP);

                           .7 Any  Guaranty  Obligations  of any Borrower in the
form of performance  guaranties  undertaken on behalf of a Marine  Subsidiary of
such Borrower in favor of the charter party in connection  with the leasing of a
marine vessel on a time charter; and

                           .8 Contingent Obligations (but excluding specifically
Guaranty Obligations which shall be prohibited) of FSI solely in its capacity as
a general partner or manager of the Equipment Growth Funds.

         . Each  Borrower  and FSI shall  not,  and shall not  permit any Marine
Subsidiary  of such  Borrower  or  Owner  Trustee  holding  record  title to any
Eligible  Inventory for the beneficial  interest of such Borrower or FSI to, use
the  proceeds  of any Loan except for the purpose set forth in Recital D, above,
and shall not,  and shall not permit any such  Marine  Subsidiary  or such Owner
Trustee to, use the  proceeds  to repay any loans or advances  made by any other
Person.

         . Each  Borrower  and FSI shall  not,  and shall not  permit any Marine
Subsidiary  of such Borrower or any Owner  Trustee  holding  record title to any
Eligible Inventory for the beneficial interest of such Borrower or FSI to, sell,
assign or otherwise  dispose of, any of its or their respective  assets,  except
for  full,  fair  and  reasonable  consideration,  or  enter  into  any sale and
leaseback  agreement  covering any of its or their  respective  fixed or capital
assets.

         . Each  Borrower  and FSI shall  not,  and shall not  permit any Marine
Subsidiary  of  such  Borrower  to,  enter  into  any   transaction  of  merger,
consolidation or recapitalization,  directly or indirectly, whether by operation
of law or  otherwise,  or liquidate,  wind up or dissolve  itself (or suffer any
liquidation  or  dissolution),  or convey,  sell,  lease,  assign,  transfer  or
otherwise dispose of, in one transaction or a series of transactions, all or any
part of its  business,  Property  or  assets,  whether  now  owned or  hereafter
acquired,  or acquire by  purchase or  otherwise  all or  substantially  all the
business,  Property  or assets  of,  or stock or other  evidence  of  beneficial
ownership of, any Person,  except (a) sales of Equipment in the ordinary  course
of business  (for the purposes of this Section 6.6, with respect to any Borrower
and any Marine  Subsidiary of such Borrower,  ordinary  course of business shall
refer to the business of the Equipment Growth Funds and all Marine Subsidiaries,
collectively),  and (b) any  Subsidiary  of FSI (other than TEC AcquiSub) may be
merged or consolidated  with or into FSI or any wholly-owned  Subsidiary of FSI,
or be  liquidated,  wound up or dissolved,  or all or  substantially  all of its
business,  property or assets may be  conveyed,  sold,  leased,  transferred  or
otherwise  disposed of, in one transaction or a series of transactions,  to, FSI
or any  wholly-owned  Subsidiary  of FSI;  provided  that, in the case of such a
merger  or  consolidation,  FSI or such  wholly-owned  Subsidiary  shall  be the
continuing or surviving corporation.

         . Each Borrower  shall not, and shall not permit any Marine  Subsidiary
of such Borrower to,  directly or indirectly,  enter into or permit to exist any
transaction  (including,  without  limitation,  the  purchase,  sale,  lease  or
exchange  of any  property  or the  rendering  of any  service)  with any of its
Affiliates  on terms that are less  favorable  to such  Borrower  or such Marine
Subsidiary  than those that might be obtained  at the time from  Persons who are
not such Affiliates.

         . Each  Borrower and FSI shall not, and FSI shall not permit any of its
existing  Subsidiaries to, engage in any business materially  different than the
business currently engaged in by such Person.

         . Each  Borrower  shall  not  make,  pay or set apart any funds for the
payment of  distribution to its partners or members if such  distribution  would
cause or result in an Event of Default or Potential Event of Default.

         . Each  Borrower  and FSI  shall  not take or omit to take any  action,
which act or omission would, with the lapse of time, or otherwise constitute (a)
a default,  event of default or Event of Default under any of the Loan Documents
or (b) a default  or an event of  default  under any other  material  agreement,
contract, lease, license,  mortgage, deed of trust or instrument to which either
is a party or by which  either  or any of their  Properties  or assets is bound,
which default or event of default  would,  with  reasonable  likelihood,  have a
Material Adverse Effect.

         . If any  Borrower or FSI or any of their ERISA  Affiliates  incurs any
obligation to contribute to any Pension Plan,  then such Borrower or FSI, as the
case may be,  shall  not (a)  terminate,  or  permit  such  ERISA  Affiliate  to
terminate,  any Pension Plan so as to result in any liability  that would,  with
reasonable likelihood, have a Material Adverse Effect or (b) make or permit such
ERISA Affiliate to make a complete or partial  withdrawal (within the meaning of
Section  4201 of  ERISA)  from any  Multiemployer  Plan so as to  result  in any
liability  that  would,  with  reasonable  likelihood,  have a Material  Adverse
Effect.

         . Each  Borrower and FSI shall not use or  authorize  others to use any
Lender's  name  or  marks  in any  publication  or  medium,  including,  without
limitation, any prospectus, without such Lender's advance written authorization.

         . Each  Borrower  and FSI shall not change  their  fiscal year end from
December 31, nor make any change in their  accounting  treatment  and  reporting
practices  except as  permitted  by GAAP;  provided,  however,  that  should any
Borrower or FSI change its accounting  treatment or reporting practices in a way
that  would  cause  a  change  in  the  calculation,  or  in  the  results  of a
calculation,  of any of the  financial  covenants set forth in Section 7, below,
then such  Borrower or FSI, as  applicable,  shall  continue to  calculate  such
covenants as if such  accounting  treatment  or reporting  practice had not been
changed unless otherwise agreed to by Requisite Lenders.

         . Each  Borrower and FSI shall not,  shall not cause to occur and shall
not permit any amendment,  modification  or supplement of or to any of the terms
or provisions of such Borrower's Limited  Partnership  Agreement or, in the case
of Income Fund I, its Operating  Agreement,  which  amendment,  modification  or
supplement would affect,  limit or otherwise  impair such Borrower's  ability to
pay the  Obligations or perform its  obligations  under this Agreement or any of
the other Loan Documents.

 .        7.        FINANCIAL COVENANTS OF BORROWER AND FSI

         Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI,  jointly and severally with each Borrower as to each
Borrower and as to itself,  covenant and agree that, so long as the  Commitments
hereunder shall be available,  and until full, complete and indefeasible payment
and performance of the Obligations,  including,  without  limitation,  all Loans
evidenced by the Notes,  unless  Requisite  Lenders shall  otherwise  consent in
writing, Borrowers and FSI shall perform the following financial covenants. Each
Borrower and FSI agree and understand that (except as expressly provided herein)
all covenants  under this Section 7 shall be subject to quarterly  compliance or
compliance  as of the date of any request for a Loan  pursuant to Section  3.2.1
(as measured on the last day of each fiscal quarter of such Borrower, or FSI, as
the case may be, or as of the date of any request for a Loan pursuant to Section
3.2.1),  and in each case review by Lenders of the respective  fiscal  quarter's
consolidated  financial  statements  delivered to Agent by each Borrower and FSI
pursuant  to  Section  5.1;  provided,  however,  that the  following  financial
covenants  shall  apply only as to those  Borrowers  requesting  a Loan or as to
which a Loan remains outstanding.

         . Each Borrower  shall maintain a Funded Debt Ratio of not greater than
0.5:1.0.

         . Each  Borrower  shall  maintain a Debt Service Ratio of not less than
1.75:1.0.

         . FSI shall maintain a Consolidated Tangible Net Worth of not less than
$20,000,000.

         . The Equipment  Growth Funds of which FSI is the sole general  partner
shall maintain aggregate unrestricted cash balances of $10,000,000.

 .        8.        EVENTS OF DEFAULT AND REMEDIES

         . As to any  Borrower,  the  occurrence  of  any  one  or  more  of the
following  shall   constitute  an  Event  of  Default  for  each  such  Borrower
individually:

                  . Such Borrower, any Marine Subsidiary of such Borrower or any
Owner Trustee holding record title to any Eligible  Inventory for the beneficial
interest  of such  Borrower  or FSI fails to pay any sum due to Lenders or Agent
arising under this Agreement, the Note of such Borrower or any of the other Loan
Documents  when  and as the  same  shall  become  due and  payable,  whether  by
acceleration or otherwise and such failure shall not have been cured to Lenders'
satisfaction within five (5) calendar days; or

                  . (a) Such Borrower,  any Marine  Subsidiary of such Borrower,
FSI, TEC, TEC AcquiSub or any Owner Trustee holding record title to any Eligible
Inventory for the beneficial interest of such Borrower defaults in the repayment
of any principal of or the payment of any interest on any  Indebtedness  of such
Borrower,  any such Marine Subsidiary,  FSI, TEC, TEC AcquiSub or any such Owner
Trustee, respectively, or breaches any term of any evidence of such Indebtedness
or defaults in any payment in respect of any Contingent  Obligation  (excluding,
as to FSI, any Contingent  Obligation of FSI arising solely as a result of FSI's
status as a general  partner of any Person  other than such  Borrower),  in each
case exceeding,  in the aggregate outstanding principal amount,  $2,000,000,  or
such  Borrower,  any Marine  Subsidiary,  FSI,  TEC,  TEC  AcquiSub or any Owner
Trustee  breaches  or violates  any term or  provision  of any  evidence of such
Indebtedness or Contingent  Obligation or of any such loan agreement,  mortgage,
indenture,  guaranty or other agreement  relating  thereto if the effect of such
breach  is  to  permit  acceleration  under  the  applicable  instrument,   loan
agreement,  mortgage,  indenture,  guaranty or other  agreement and such failure
shall not have been cured  within the  applicable  cure  period,  or there is an
acceleration  under  the  applicable  instrument,   loan  agreement,   mortgage,
indenture, guaranty or other agreement; or (b) PLMI defaults in the repayment of
any principal of or the payment of any interest on any  Indebtedness or defaults
in any payment in respect of any Contingent Obligation,  in each case exceeding,
in the aggregate outstanding principal amount,  $2,000,000,  or PLMI breaches or
violates  any  term  or  provision  of any  evidence  of  such  Indebtedness  or
Contingent  Obligation  or of any  such  loan  agreement,  mortgage,  indenture,
guaranty  or  other  agreement  relating  thereto  with  the  result  that  such
Indebtedness  or Contingent  Obligation  becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or

                  . Such  Borrower or FSI fails or neglects to perform,  keep or
observe any of the covenants  contained in Sections  2.1.3,  5.2, 5.3, 5.9, 6.1,
6.2,  6.3,  6.4,  6.5,  6.6,  6.7,  6.8,  6.9 or 6.13,  or any of the  financial
covenants contained in Section 7 of this Agreement; or

                  . Any  representation or warranty made by or on behalf of such
Borrower or FSI in this  Agreement or any statement or  certificate  at any time
given in  writing  pursuant  hereto or in  connection  herewith  shall be false,
misleading or incomplete in any material respect when made; or

                  .  Except as  provided  in  Sections  8.1.1  and  8.1.3,  such
Borrower, FSI or any Marine Subsidiary of such Borrower or Owner Trustee holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower or FSI fails or neglects  to perform,  keep or observe any  covenant or
provision of this  Agreement or of any of the other Loan  Documents or any other
document or agreement executed by such Borrower, FSI or any Marine Subsidiary of
such Borrower or Owner Trustee  holding  record title to any Eligible  Inventory
for the beneficial interest of such Borrower or FSI in connection  therewith and
the same has not been cured to Requisite  Lenders'  satisfaction  within  thirty
(30) calendar  days after such  Borrower,  FSI or any Marine  Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial interest of such Borrower or FSI shall become aware thereof,  whether
by written notice from Agent or any Lender or otherwise; or

                  . Such Borrower,  any Marine Subsidiary of such Borrower,  TEC
AcquiSub,  any other Borrower (but only for so long as Obligations of such other
Borrower  remain or Commitments to such other Borrower are available  under this
Agreement),  FSI,  TEC, PLMI or any Owner  Trustee  holding  record title to any
Eligible  Inventory for the  beneficial  interest of such Borrower or FSI or any
other guarantor of any of such Borrower's or FSI's  obligations to Lenders shall
(a) cease to be Solvent,  (b) admit in writing its inability to pay its debts as
they mature, (c) make an assignment for the benefit of creditors,  (d) apply for
or consent to the  appointment of a receiver,  liquidator,  custodian or trustee
for it or for a  substantial  part  of its  Properties  or  business,  or such a
receiver,  liquidator,  custodian or trustee  otherwise  shall be appointed  and
shall not be discharged within sixty (60) days after such appointment; or

                  .  Bankruptcy,   insolvency,   reorganization  or  liquidation
proceedings or other  proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against such  Borrower,  any
Marine Subsidiary of such Borrower,  TEC AcquiSub,  any other Borrower (but only
for so long as Obligations of such other Borrower  remain or Commitments to such
other Borrower are available under this Agreement),  FSI, TEC, PLMI or any Owner
Trustee  holding  record  title to any  Eligible  Inventory  for the  beneficial
interest  of  such  Borrower  or FSI  or  any  other  guarantor  of any of  such
Borrower's  or FSI's  obligations  to Lenders or any order,  judgment  or decree
shall be entered against such Borrower,  any Marine Subsidiary of such Borrower,
TEC AcquiSub,  any other  Borrower (but only for so long as  Obligations of such
other Borrower  remain or Commitments to such other Borrower are available under
this Agreement), FSI, TEC, PLMI or any Owner Trustee holding record title to any
Eligible  Inventory for the  beneficial  interest of such Borrower or FSI or any
other  guarantor  of any of such  Borrower's  or FSI's  obligations  to  Lenders
decreeing its  dissolution or division;  provided,  however,  with respect to an
involuntary petition in bankruptcy,  such petition shall not have been dismissed
within sixty (60) days after the filing of such petition; or

                  . There shall have been a change in the  assets,  liabilities,
financial  condition,  operations,  affairs or prospects of such  Borrower,  any
Marine  Subsidiary of such Borrower,  TEC AcquiSub,  FSI, TEC, PLMI or any Owner
Trustee  holding  record  title to any  Eligible  Inventory  for the  beneficial
interest  of  such  Borrower  or FSI  or  any  other  guarantor  of any of  such
Borrower's  or  FSI's   obligations   to  Lenders   which,   in  the  reasonable
determination of Requisite Lenders has, either individually or in the aggregate,
had a Material Adverse Effect; or

                  .  There  shall  be a  money  judgment,  writ  or  warrant  of
attachment or similar process entered or filed against such Borrower, any Marine
Subsidiary of such Borrower, TEC AcquiSub, FSI, TEC or any Owner Trustee holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower or FSI which (net of insurance  coverage) remains unvacated,  unbonded,
unstayed or unpaid or undischarged for more than sixty (60) days (whether or not
consecutive) or in any event later than five (5) calendar days prior to the date
of any proposed sale thereunder,  which, together with all such other unvacated,
unbonded,  unstayed,  unpaid and undischarged  judgments or attachments  against
such Borrower or any Marine Subsidiary of such Borrower exceeds in the aggregate
$1,000,000;  against FSI exceeds in the aggregate  $500,000;  against TEC or TEC
AcquiSub exceeds in the aggregate $500,000; or against any Owner Trustee holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower or FSI exceeds in the aggregate $1,000,000;  or against any combination
of the foregoing Persons exceeds in the aggregate $1,000,000; or

                  . Any of the Loan  Documents  shall for any reason  other than
the full, complete and indefeasible  satisfaction of the Obligations  thereunder
cease to be, or be asserted by such  Borrower,  FSI or any Marine  Subsidiary of
such Borrower or Owner Trustee  holding  record title to any Eligible  Inventory
for the  beneficial  interest of such Borrower or FSI not to be, a legal,  valid
and binding  obligation of such Borrower,  FSI or any Marine  Subsidiary of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial  interest of such Borrower or FSI,  respectively  enforceable against
such Person in accordance with its terms; or

                  . The  occurrence  of any "Event of Default" as defined  under
the TEC AcquiSub Agreement or any other loan or security document related to the
TEC AcquiSub Agreement; or

                  . The  occurrence  of any "Event of Default" as defined  under
the AFG  Agreement  or any other loan or  security  document  related to the AFG
Agreement; or

                  . FSI shall cease to be the sole  general  partner or the sole
manager,  as  applicable,  of such  Borrower,  whether due to the  voluntary  or
involuntary withdrawal,  substitution, removal or transfer of FSI from or of all
or any portion of FSI's general partnership  interest or capital contribution in
such Borrower; or

                  . Requesting Borrower, TEC AcquiSub, FSI or their Subsidiaries
shall  cease to be the  purchaser  of  Eligible  Inventory  for such  Requesting
Borrower.

                  . A  criminal  proceeding  shall  have been filed in any court
naming any  Borrower,  FSI or any Marine  Subsidiary  of such  Borrower or Owner
Trustee  holding  record  title to any  Eligible  Inventory  for the  beneficial
interest  of such  Borrower  or FSI as a  defendant  for which  forfeiture  is a
potential penalty under applicable federal or state law which, in the reasonable
determination of Requisite Lenders, may have a Material Adverse Effect; or

                  . Any Governmental  Authority enters a decree, order or ruling
("Government Action") which will materially and adversely affect any Borrower's,
any Marine Subsidiary of such Borrower's, FSI's, TEC's, TEC AcquiSub's or PLMI's
financial  condition,  operations  or ability  to  perform  or pay such  party's
obligations arising under this Agreement or any instrument or agreement executed
pursuant to the terms of this Agreement or which will similarly affect any Owner
Trustee  holding  record  title to any  Eligible  Inventory  for the  beneficial
interest of such  Borrower or FSI.  Such  Borrower or FSI shall have thirty (30)
days from the  earlier of the date (a)  Borrower or FSI,  as  applicable,  first
discovers it is the subject of  Government  Action or (b) a Lender or any agency
gives notice of Government  Action to take such steps as are necessary to obtain
relief from the Government  Action.  For the purpose of this paragraph,  "relief
from  Government  Action"  means to  discharge  or to obtain a  dismissal  of or
release or relief from (i) any  Government  Action so that the affected party or
parties do not incur monetary  liability (A) of more than $1,000,000 in the case
of any  Borrower or any Marine  Subsidiary  of such  Borrower,  (B) of more than
$500,000 in the case of FSI,  (C) of more than  $500,000 in the case of TEC, (D)
of more than $250,000 in the case of TEC AcquiSub,  (E) of more than  $1,000,000
in the case of PLMI, or (F) of more than  $1,000,000,  in the aggregate,  in the
case of any combination of the foregoing Persons,  or (ii) any  disqualification
of or other limitation on the operation of any Borrower,  any Marine  Subsidiary
of such Borrower,  FSI, TEC, TEC AcquiSub and PLMI, or any of them, which in the
reasonable  determination  of  Requisite  Lenders  may have a  Material  Adverse
Effect; or

                  . Any Governmental Authority,  including,  without limitation,
the SEC, shall enter a decree,  order or ruling prohibiting the Equipment Growth
Funds from releasing or paying to FSI any funds in the form of management  fees,
profits  or  otherwise  which,  in the  reasonable  determination  of  Requisite
Lenders, may have a Material Adverse Effect.

         . An Event of Default may be waived  only with the  written  consent of
Requisite  Lenders,  or if  expressly  provided,  of all  Lenders.  Any Event of
Default so waived  shall be deemed to have been cured and not to be  continuing;
but no such waiver  shall be deemed a  continuing  waiver or shall  extend to or
affect any subsequent like default or impair any rights arising therefrom.

         . Upon the  occurrence  and  continuance  of any  Event of  Default  or
Potential Event of Default,  Lenders shall have no further obligation to advance
money or extend credit to or for the benefit of the  defaulting  Borrower or any
other  Borrower,  regardless of whether such Event of Default or Potential Event
of Default has occurred with respect to such Borrower or another Borrower.

         In addition, upon the occurrence and during the continuance of an Event
of Default,  except an Event of Default arising under Section 8.1.11 hereof (the
remedies  for  which  shall be  limited  to  those  set  forth in the  preceding
paragraph),  Lenders or Agent, on behalf of Lenders,  may, as to such defaulting
Borrower,  or as to all Borrowers  should such Event of Default  result from the
actions or inactions of FSI, at the option of Requisite  Lenders,  do any one or
more of the following,  all of which are hereby  authorized by each Borrower and
FSI:

                           .1  Declare  all or any of the  Obligations  of  such
Borrower  under  this  Agreement,  the Note of such  Borrower,  the  other  Loan
Documents and any other  instrument  executed by such  Borrower  pursuant to the
Loan Documents to be immediately due and payable, and upon such declaration such
obligations  so  declared  due and  payable  shall  immediately  become  due and
payable;  provided that if such Event of Default is under part 8.1.6 or 8.1.7 of
Section  8.1,  then  all  of the  Obligations  of  each  Borrower  shall  become
immediately due and payable  forthwith  without the requirement of any notice or
other action by Lenders or Agent;

                           .2  Terminate   this   Agreement  as  to  any  future
liability or  obligation  of Agent or Lenders as to such  Borrower or as to each
Borrower  if such  Event of  Default  results  from the  actions,  inactions  or
violation of any covenant of or by FSI (excluding,  as to FSI, Events of Default
under Section 8.1.2 arising in relation to Contingent  Obligation of FSI arising
solely as a result of FSI's status as a general partner of any Person other than
such Borrower); and

                           .3  Exercise  in  addition  to all other  rights  and
remedies  granted  hereunder,  any and all rights and remedies granted under the
Loan Documents or otherwise available at law or in equity.

         .        4         Set-Off

                           .1 During the continuance of an Event of Default, any
deposits or other sums credited by or due from any Lender to any Borrower or FSI
(exclusive of deposits in accounts  expressly  held in the name of third parties
or held in trust for  benefit  of third  parties)  may be  set-off  against  the
Obligations of such Borrower and any and all other liabilities,  due or existing
or hereafter  arising and owing by such Borrower or FSI to Lenders.  Each Lender
agrees  to notify  promptly  Borrowers  and FSI and  Agent of any such  set-off;
provided,  that the failure to give such notice shall not affect the validity of
any such set-off.

                           .2 Each Lender  agrees  that if it shall,  whether by
right of set-off,  banker's lien or similar  remedy  pursuant to Section  8.4.1,
obtain any  payment as a result of which the  outstanding  and unpaid  principal
portion of the  Commitments  of such Lender shall be less than such Lender's Pro
Rata Share of the outstanding and unpaid  principal  portion of the aggregate of
all  Commitments,  such  Lender  receiving  such  payment  shall  simultaneously
purchase from each other Lender a participation  in the Commitments held by such
Lenders so that the outstanding and unpaid  principal  amount of the Commitments
and participations in Commitments of such Lender shall be in the same proportion
to the  unpaid  principal  amount  of the  aggregate  of  all  Commitments  then
outstanding as the unpaid  principal amount under the Commitments of such Lender
outstanding  immediately  prior to  receipt  of such  payment  was to the unpaid
principal  amount of the aggregate of all  Commitments  outstanding  immediately
prior to such Lender's receipt of such payment;  provided,  however, that if any
such  purchase  shall be made  pursuant  to this  Section  8.4.2 and the payment
giving rise thereto  shall  thereafter  be  recovered,  such  purchase  shall be
rescinded to the extent of such recovery and the purchase price restored without
interest.  Each Borrower  expressly  consents to the foregoing  arrangements and
agrees that any Lender holding a  participation  in a Commitment  deemed to have
been so purchased  may exercise any and all rights of set-off,  banker's lien or
similar  remedy  with  respect to any and all moneys  owing by  Borrower to such
Lender  as fully as if such  Lender  held a  Commitment  in the  amount  of such
participation.

         . The  enumeration  of the rights and remedies of Agent and Lenders set
forth in this  Agreement  is not intended to be  exhaustive  and the exercise by
Agent and Lenders of any right or remedy  shall not preclude the exercise of any
other  rights or  remedies,  all of which shall be  cumulative,  and shall be in
addition  to any  other  right or  remedy  given  hereunder  or  under  the Loan
Documents or that may now or  hereafter  exist in law or in equity or by suit or
otherwise.  No delay or failure to take  action on the part of Agent and Lenders
in exercising  any right,  power or privilege  shall operate as a waiver hereof,
nor shall any single or partial  exercise of any such right,  power or privilege
preclude other or further  exercise  thereof or the exercise of any other right,
power or  privilege or shall be construed to be a waiver of any Event of Default
or Potential Event of Default.  No course of dealing between any Borrower,  FSI,
Agent, or any Lender or their respective  agents or employees shall be effective
to change,  modify or discharge  any  provision of this  Agreement or any of the
Loan  Documents  or to  constitute a waiver of any Event of Default or Potential
Event of Default.

 .        9.        AGENT

         . Each of the Lenders hereby irrevocably  designates and appoints First
Union  National  Bank of North  Carolina as the Agent of such Lender  under this
Agreement  and the  other  Loan  Documents,  and each  such  Lender  irrevocably
authorizes  First Union  National  Bank of North  Carolina as the Agent for such
Lender to take such action on its behalf under the  provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly  delegated to the Agent by the terms of this Agreement and such
other  Loan  Documents,  together  with  such  other  powers  as are  reasonably
incidental  thereto.  Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein and therein, or any
fiduciary  relationship with any Lender,  and no implied  covenants,  functions,
responsibilities,  duties,  obligations or  liabilities  shall be read into this
Agreement or the other Loan Documents or otherwise  exist against Agent.  To the
extent any provision of this  Agreement  permits  action by Agent,  Agent shall,
subject to the  provisions  of this  Section 9, take such  action if directed in
writing to do so by Requisite Lenders.

         . Agent may  execute  any of its duties  under this  Agreement  and the
other Loan  Documents  by or through  agents or  attorneys-in-fact  and shall be
entitled to advice of counsel  concerning all matters pertaining to such duties.
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.

         . Neither Agent nor any of its officers, directors,  employees, agents,
attorneys-in-fact  or  Affiliates  shall be (a) liable  for any action  lawfully
taken or omitted to be taken by it or such Person  under or in  connection  with
this Agreement or the other Loan Documents  (except for its or such Person's own
gross negligence or willful misconduct), or (b) responsible in any manner to any
Lender for any recitals,  statements,  representations or warranties made by any
Borrower or any officer  thereof  contained in this  Agreement or the other Loan
Documents or in any certificate, report, statement or other document referred to
or  provided  for in, or received by Agent  under or in  connection  with,  this
Agreement or the other Loan Documents or for the value, validity, effectiveness,
genuineness,  enforceability  or sufficiency of this Agreement or the other Loan
Documents  or for  any  failure  of any  Borrower  to  perform  its  obligations
hereunder or  thereunder.  Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the  observance  or  performance  of any of the
agreements  contained in, or conditions  of, this  Agreement,  or to inspect the
Properties, books or records of any Borrower.

         . Agent  shall be  entitled to rely,  and shall be fully  protected  in
relying,  upon any note,  writing,  resolution,  notice,  consent,  certificate,
affidavit,  letter,  cablegram,  telegram,  telecopy, telex or teletype message,
statement,  order or other document or conversation believed by it to be genuine
and  correct  and to have  been  signed,  sent or made by the  proper  Person or
Persons and upon advice and  statements  of legal  counsel  (including,  without
limitation,  counsel to Borrowers),  independent  accountants  and other experts
selected  by Agent.  Agent may deem and treat the payee of any  promissory  note
issued  pursuant to this Agreement as the owner thereof for all purposes  unless
such  promissory  note shall have been  transferred  in accordance  with Section
11.10 hereof.  Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan  Documents  unless it shall first
receive such advice or concurrence of Requisite  Lenders as it deems appropriate
or it shall first be indemnified to its  satisfaction by Lenders against any and
all  liability  and  expense  which may be incurred by it by reason of taking or
continuing  to take any such  action  except  for its own  gross  negligence  or
willful misconduct. Agent shall in all cases be fully protected in acting, or in
refraining  from acting,  under this  Agreement in accordance  with a request of
Requisite  Lenders,  and such  request  and any  action  taken or failure to act
pursuant thereto shall be binding upon all Lenders.

         .  Agent  shall  not be  deemed  to have  knowledge  or  notice  of the
occurrence  of any Event of Default  or  Potential  Event of  Default  hereunder
unless Agent has received notice from a Lender or any Borrower referring to this
Agreement,  describing  such Event of Default or Potential  Event of Default and
stating  that such  notice is a "notice  of  default".  In the event  that Agent
receives such a notice, Agent shall promptly give notice thereof to Lenders. The
Agent shall take such action with  respect to such Event of Default or Potential
Event of Default as shall be reasonably directed by Requisite Lenders;  provided
that unless and until Agent shall have received such directions,  Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Event of Default or Potential  Event of Default as it shall
deem advisable in the best interests of Lenders.

         . Each Lender expressly  acknowledges that neither Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any  representations  or warranties  to it and that no act by Agent  hereinafter
taken,  including  any  review of the  affairs of  Borrower,  shall be deemed to
constitute any  representation  or warranty by Agent to any Lender.  Each Lender
represents to Agent that it has,  independently  and without reliance upon Agent
or any other  Lender,  and based on such  documents  and  information  as it has
deemed  appropriate,  made  its own  appraisal  of and  investigation  into  the
business,   operations,    property,   financial   and   other   condition   and
creditworthiness  of each Borrower and FSI and made its own decision to make its
Loans hereunder and enter into this Agreement.  Each Lender also represents that
it will,  independently and without reliance upon Agent or any other Lender, and
based on such  documents and  information  as it shall deem  appropriate  at the
time,  continue to make its own credit  analysis,  appraisals  and  decisions in
taking or not taking action under this  Agreement and the other Loan  Documents,
and to make such  investigation as it deems necessary to inform itself as to the
business,   operations,    property,   financial   and   other   condition   and
creditworthiness of each Borrower and FSI. Except for notices, reports and other
documents  expressly  required to be furnished to the Lenders by Agent hereunder
or by the other Loan Documents,  Agent shall not have any duty or responsibility
to  provide  any  Lender  with any credit or other  information  concerning  the
business,    operations,    property,   financial   and   other   condition   or
creditworthiness  of each Borrower and FSI which may come into the possession of
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.

         . Each Lender agrees to indemnify Agent in its capacity as such (to the
extent not  reimbursed  by  Borrowers  and without  limiting the  obligation  of
Borrowers to do so),  ratably  according to the respective  amounts of their Pro
Rata  Share  of the  Commitments,  from  and  against  any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  or  disbursements  of any  kind  whatsoever  which  may  at  any  time
(including,  without limitation, at any time following the payment of the Loans)
be imposed on,  incurred by or asserted  against Agent in any way relating to or
arising out of this  Agreement  or the other Loan  Documents,  or any  documents
contemplated   by  or  referred  to  herein  or  therein  or  the   transactions
contemplated  hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The  agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.

         . Agent and its Affiliates may make loans to, accept  deposits from and
generally  engage in any kind of  business  with any  Borrower  or FSI as though
Agent were not Agent hereunder.  With respect to Advances made or renewed by it,
Agent shall have the same rights and powers under this  Agreement  and the other
Loan  Documents  as any Lender and may  exercise  the same as though it were not
Agent,  and  the  terms  "Lender"  and  "Lenders"  shall  include  Agent  in its
individual capacity.

         . Agent may  resign  at any time by  giving  thirty  (30)  days'  prior
written  notice thereof to Lenders and Borrowers;  provided,  however,  that the
retiring Agent shall  continue to serve until a successor  Agent shall have been
selected and approved pursuant to this Section 9.9. Upon any such notice,  Agent
shall have the right to appoint a successor Agent;  provided,  however,  that if
such  successor  shall not be a signatory to this  Agreement,  such  appointment
shall be subject to the consent of Requisite  Lenders.  Agent may be replaced by
Requisite Lenders, with or without cause; provided,  however, that any successor
agent  shall be  subject  to  Borrowers'  consent,  which  consent  shall not be
unreasonably  withheld.  Upon  the  acceptance  of any  appointment  as an Agent
hereunder by a successor Agent,  such successor Agent shall thereupon succeed to
and become  vested with all the  rights,  powers,  privileges  and duties of the
retiring  Agent,  and the retiring Agent shall be discharged from its duties and
obligations  under  this  Agreement.  After  any  retiring  Agent's  resignation
hereunder as Agent,  the provisions of this Section 9 shall inure to its benefit
as to any  actions  taken or omitted to be taken by it while it was Agent  under
this Agreement.

 .        10.       EXPENSES AND INDEMNITIES

         . Borrowers and Lenders agree that, as the following  costs,  expenses,
charges  and  other  disbursements  benefit  each  Borrower  and as such  costs,
expenses,  charges and other disbursements cannot easily be ratably allocated to
the account of any  Borrower  or  Borrowers,  each  Borrower,  unless  otherwise
specified  in this  Section  10.1,  shall pay,  as its  Obligation,  promptly on
demand,  and in any event within thirty (30) days of the invoice date  therefor,
(a) all costs,  expenses,  charges and other disbursements  (including,  without
limitation,  all reasonable  attorneys'  fees and allocated  expenses of outside
counsel  and  in-house  legal  staff)  incurred  by or on behalf of Agent or any
Lender  in  connection  with  the  preparation  of the  Loan  Documents  and all
amendments  and  modifications  thereof,  extensions  thereto  or  substitutions
therefor, and all costs, expenses, charges or other disbursements incurred by or
on behalf of Agent or any Lender  (including,  without limitation all reasonable
attorney's  fees and allocated  expenses of outside  counsel and in-house  legal
staff) in  connection  with the  furnishing  of opinions of counsel  (including,
without  limitation,  any opinions  requested by Lenders as to any legal matters
arising  hereunder) and of Borrowers'  performance  of and  compliance  with all
agreements and conditions contained herein or in any of the other Loan Documents
on its part to be performed  or complied  with;  (b) all other costs,  expenses,
charges and other disbursements  incurred by or on behalf of Agent or any Lender
in connection  with the  negotiation,  preparation,  execution,  administration,
continuation and enforcement of the Loan Documents,  and the making of the Loans
hereunder; (c) all costs, expenses,  charges and other disbursements (including,
without  limitation,  all reasonable  attorney's fees and allocated  expenses of
outside  counsel and in-house legal staff)  incurred by or on behalf of Agent or
any Lender in  connection  with the  assignment  or attempted  assignment to any
other Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section  11.10;  and (d)  regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal,  audit, accounting,
consulting  or other  fees,  costs,  expenses,  charges  or other  disbursements
incurred  by or on  behalf  of  Agent  or any  Lender  in  connection  with  any
litigation,  contest, dispute, suit, proceeding or action (whether instituted by
Lenders,  Agent,  any  Borrower  or any other  Person)  seeking to  enforce  any
Obligations  of, or collecting  any payments due from,  any Borrower  under this
Agreement and the Notes,  all of which amounts shall be deemed to be part of the
Obligations;  provided,  however,  that Lenders shall be entitled to collect the
full amount of such costs, expenses,  charges and other disbursements only once.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential  Event of Default shall have occurred and be
continuing,  all appraisals of the Eligible Inventory shall be at the expense of
Lenders.  If an Event of  Default  or  Potential  Event of  Default  shall  have
occurred  and be  continuing,  such  appraisals  shall be at the  expense of the
Requesting Borrower.

         .  Whether  or  not  the  transactions  contemplated  hereby  shall  be
consummated:

                  . Each Borrower,  as to itself, and FSI, jointly and severally
as to itself and each  Borrower,  shall pay,  indemnify,  and hold each  Lender,
Agent and each of their  respective  officers,  directors,  employees,  counsel,
agents and  attorneys-in-fact  (each, an "Indemnified Person") harmless from and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments, suits, costs, charges, expenses or disbursements (including
reasonable  attorney's  fees and the allocated cost of in-house  counsel) of any
kind or nature whatsoever with respect to the execution, delivery,  enforcement,
performance and  administration  of this Agreement and any other Loan Documents,
or the  transactions  contemplated  hereby and thereby,  and with respect to any
investigation,   litigation  or  proceeding   (including  any  case,  action  or
proceeding  before  any  court  or  other  Governmental  Authority  relating  to
bankruptcy,  reorganization,  insolvency, liquidation,  dissolution or relief of
debtors or any appellate  proceeding)  related to this Agreement or the Loans or
the use of the  proceeds  thereof,  whether or not any  Indemnified  Person is a
party thereto (all the foregoing,  collectively, the "Indemnified Liabilities");
provided,  that  Borrowers  and FSI shall have no  obligation  hereunder  to any
Indemnified  Person with  respect to  Indemnified  Liabilities  arising from the
gross negligence or willful misconduct of such Indemnified Person.

                  .        .2        Environmental Indemnity

                        (a) Each  Borrower,  to the extent of its pro rata share
         of ownership of Property involved in any  investigation,  litigation or
         proceeding,  as set forth below,  and FSI hereby  jointly and severally
         agree to indemnify,  defend and hold harmless each Indemnified  Person,
         from and against any and all liabilities, obligations, losses, damages,
         penalties,  actions,  judgments,  suits,  costs,  charges,  expenses or
         disbursements  (including  reasonable attorneys' fees and the allocated
         cost of in-house counsel and of internal  environmental audit or review
         services),   which  may  be  incurred  by  or  asserted   against  such
         Indemnified  Person in connection with or arising out of any pending or
         threatened investigation, litigation or proceeding, or any action taken
         by any Person,  with respect to any Environmental  Claim arising out of
         or related to any Property owned,  leased or operated by such Borrower.
         No  action  taken by legal  counsel  chosen  by Agent or any  Lender in
         defending against any such  investigation,  litigation or proceeding or
         requested  remedial,  removal or  response  action  shall  (except  for
         actions which constitute fraud, willful misconduct, gross negligence or
         material  violations of law) vitiate or in any way impair Borrowers' or
         FSI's  obligation  and duty  hereunder to indemnify  and hold  harmless
         Agent and each Lender.  Agent and all Lenders  agree to use  reasonable
         efforts to  cooperate  with  Borrowers  respecting  the  defense of any
         matter indemnified hereunder,  except insofar as and to the extent that
         their  respective  interests  may be adverse to  Borrowers' or FSI's in
         Agent's or such Lender's sole discretion.

                        (b) In no event  shall any site visit,  observation,  or
         testing by Agent or any Lender be deemed a  representation  or warranty
         that  Hazardous  Materials  are or are not present in, on, or under the
         site,  or  that  there  has  been  or  shall  be  compliance  with  any
         Environmental  Law.  Neither  Borrowers,  FSI nor any  other  Person is
         entitled to rely on any site visit, observation, or testing by Agent or
         any Lender.  Except as otherwise provided by law, neither Agent nor any
         Lender owes any duty of care to protect Borrowers,  or any one of them,
         or any other Person against,  or to inform Borrowers or any other party
         of, any Hazardous  Materials or any other adverse  condition  affecting
         any site or Property.  Neither  Agent nor any Lender shall be obligated
         to  disclose  to  Borrowers,  FSI or any  other  Person  any  report or
         findings  made as a result of, or in connection  with,  any site visit,
         observation, or testing by Agent or any Lender.

                  . The  obligations in this Section 10.2 shall survive  payment
of all other Obligations.  At the election of any Indemnified Person,  Borrowers
shall defend such  Indemnified  Person using legal counsel  satisfactory to such
Indemnified Person in such Person's reasonable discretion,  at the sole cost and
expense of  Borrowers,  which cost and expense  shall be  allocated to Borrowers
according  to such  Borrower's  pro rata share of  ownership  of any Property in
relation to which such  obligations  arise. All amounts owing under this Section
10.2 shall be paid within thirty (30) days after written demand.

 .        11.       MISCELLANEOUS

         . All covenants, agreements, representations and warranties made herein
shall survive the execution and delivery of the Loan Documents and the making of
the Loans hereunder.

         . No  failure  or  delay on the  part of  Agent  or any  Lender  in the
exercise of any power, right or privilege under this Agreement,  the Note or any
of the other Loan  Documents  shall impair such power,  right or privilege or be
construed to be a waiver of any default or acquiescence  therein,  nor shall any
single or partial exercise of any such power,  right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.

         . Except as otherwise  provided in this Agreement,  any notice or other
communication  herein  required or permitted to be given shall be in writing and
may be  delivered  in  person,  with  receipt  acknowledged,  or sent by  telex,
facsimile,  telecopy, computer transmission or by United States mail, registered
or  certified,  return  receipt  requested,  or  by  Federal  Express  or  other
nationally   recognized   overnight   courier   service,   postage  prepaid  and
confirmation of receipt  requested,  and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein  provided.  The giving of any notice  required  hereunder may be
waived in writing by the party  entitled to receive such notice.  Every  notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly  given or served on the date on which the same
shall have been  personally  delivered,  with receipt  acknowledged,  or sent by
telex,   facsimile,   telecopy  or  computer   transmission   (with  appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United  States mail or on the next  succeeding  Business Day if the same has
been sent by Federal Express or other nationally  recognized  overnight  courier
service.  Failure or delay in delivering copies of any notice, demand,  request,
consent, approval,  declaration or other communication to the persons designated
above to receive copies shall in no way adversely  affect the  effectiveness  of
such  notice,  demand,  request,   consent,   approval,   declaration  or  other
communication.

         . Section and subsection headings in this Agreement are included herein
for  convenience  of  reference  only and  shall not  constitute  a part of this
Agreement for any other purpose or be given any substantive effect.

         . Whenever  possible,  each provision of this  Agreement,  the Note and
each of the other Loan Documents  shall be interpreted in such a manner as to be
valid,  legal and  enforceable  under the  applicable  law of any  jurisdiction.
Without limiting the generality of the foregoing sentence, in case any provision
of this Agreement, the Note or any of the other Loan Documents shall be invalid,
illegal or  unenforceable  under the  applicable  law of any  jurisdiction,  the
validity,  legality and enforceability of the remaining  provisions,  or of such
provision  in any  other  jurisdiction,  shall  not in any  way be  affected  or
impaired thereby.

         . 6 Entire Agreement; Construction; Amendments And Waivers

                           .1 This  Agreement,  the  Notes and each of the other
Loan  Documents  dated as of the date hereof,  taken  together,  constitute  and
contain the entire  agreement among  Borrowers,  Lenders and Agent and supersede
any and all prior agreements, negotiations,  correspondence,  understandings and
communications  between the parties,  whether  written or oral,  respecting  the
subject matter hereof.

                           .2  This  Agreement  is the  result  of  negotiations
between and has been reviewed by each Borrower,  FSI, and each Lender  executing
this  Agreement as of the Closing Date and Agent and their  respective  counsel;
accordingly,  this  Agreement  shall be deemed to be the  product of the parties
hereto,  and no ambiguity  shall be construed in favor of or against  Borrowers,
FSI, Lenders or Agent. Borrowers,  FSI, Lenders and Agent agree that they intend
the literal  words of this  Agreement  and the other Loan  Documents and that no
parol evidence shall be necessary or appropriate to establish Borrowers',  FSI's
any Lender's or Agent's actual intentions.

                           .3 No amendment, modification, discharge or waiver of
or consent to any  departure by any Borrower or FSI from,  any provision in this
Agreement or any of the other Loan  Documents  relating to (a) the definition of
"Borrowing  Base" or "Requisite  Lenders," (b) any increase of the amount of any
Commitment, (c) any reduction of principal,  interest or fees payable hereunder,
(d) any  postponement  of any  date  fixed  for any  payment  or  prepayment  of
principal or interest  hereunder  or (e) this Section  11.6.3 shall be effective
without  the  written  consent  of all  Lenders.  Any and all other  amendments,
modifications,  discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan  Documents  shall not be
effective  without  the  written  consent of  Requisite  Lenders.  Any waiver or
consent with respect to any provision of the Loan  Documents  shall be effective
only in the  specific  instance  and for the  specific  purpose for which it was
given.  No notice to or demand on any Borrower or FSI in any case shall  entitle
any Borrower or FSI to any other or further notice or demand in similar or other
circumstances.  Any  amendment,  modification,  waiver or  consent  effected  in
accordance  with this  Section 11.6 shall be binding upon each Lender then party
hereto and each subsequent Lender, on Borrower, and on FSI.

         . All covenants, agreements, representations and warranties made herein
by each Borrower or FSI shall,  notwithstanding  any investigation by Lenders or
Agent be deemed to be material to and to have been relied upon by Lenders.

         . Lenders  shall be under no obligation to marshall any assets in favor
of any  Borrower  or any other  person or against or in payment of any or all of
the Obligations.  To the extent that any Borrower makes a payment or payments to
Lenders or Agent,  or Lenders or Agent,  on behalf of Lenders,  enforce their or
its Liens or  exercises  their or its  rights of  set-off,  and such  payment or
payments or the proceeds of such  enforcement or set-off or any part thereof are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or required  to be repaid to a trustee,  receiver or any other party under Title
11 of the United  States Code or under any other  similar  federal or state law,
common  law or  equitable  cause,  then  to the  extent  of  such  recovery  the
obligation or part thereof originally  intended to be satisfied shall be revived
and  continued  in full force and effect as if such payment had not been made or
such enforcement or set-off had not occurred.

         . All sums payable by Borrowers or FSI pursuant to this Agreement,  the
Note or any of the other  Loan  Documents  shall be  payable  without  notice or
demand  and shall be  payable  in  United  States  Dollars  without  set-off  or
reduction of any manner whatsoever.

         .        10        Binding Effect, Assignment

                           .1  This  Agreement,  the  Note  and the  other  Loan
Documents  shall be binding  upon and shall  inure to the benefit of the parties
hereto and thereto and their respective  successors and assigns,  except that no
Borrower nor FSI may assign its rights  hereunder or  thereunder or any interest
herein or therein without the prior written consent of each Lender.  Each Lender
shall  (a) have the right in  accordance  with  this  Section  11.10 to sell and
assign to any Eligible  Assignee  all or any portion of its  interest  (provided
that any such  partial  assignment  shall not be for a principal  amount of less
than Five Million Dollars ($5,000,000)) under this Agreement,  the Notes and the
other Loan Documents,  together with a ratable interest in the AFG Agreement and
the TEC AcquiSub  Agreement and the related  Notes and other Loan  Documents (as
separately  described  and  defined in those  agreements),  subject to the prior
written  consent  of  the  affected   Borrower,   which  consent  shall  not  be
unreasonably  withheld,  and (b) to grant any  participation  or other  interest
herein or therein,  except  that each  potential  participant  to which a Lender
intends to grant any  rights  under  Sections  2.9,  2.10,  5.1 or 10.2 shall be
subject to the prior  written  consent of the affected  Borrower,  which consent
shall  not be  unreasonably  withheld;  provided,  however,  that no such  sale,
assignment or participation  grant shall result in requiring  registration under
the  Securities  Act of 1933,  as  amended,  or  qualification  under  any state
securities law.

                           .2  Subject  to  the   limitations  of  this  Section
11.10.2,  each Lender may sell and assign, from time to time, all or any portion
of its Pro Rata Share of the  Commitments  to any of its Affiliates or, with the
approval  of  the  affected  Borrower  and  FSI  (which  approval  shall  not be
unreasonably  withheld), to any other financial institution acceptable to Agent,
subject to the  assumption by such assignee of the share of the  Commitments  so
assigned.  The assignment to such Affiliate or other financial institution shall
be  evidenced  by an  Assignment  and  Assumption  in  the  form  of  Exhibit  I
("Assignment and Acceptance")  executed by the assignor Lender (hereinafter from
time to time referred to as the "Assignor  Lender") and such  Affiliate or other
financial  institution  (which,  upon  such  assignment  shall  become  a Lender
hereunder (hereinafter from time to time referred to as the "Assignee Lender")).
The Assignment and Assumption  need not include any of the economic or financial
terms upon which such Assignee  Lender receives the assignment from the Assignor
Lender,  and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such  Assignee   Lender  in  the  Assignment  and  Assumption  or  increase  the
obligations  of Borrowers or FSI under this  Agreement.  Upon  execution of such
Assignment  and  Assumption,  (a) the definition of  "Commitments"  in Section 1
hereof and the Pro Rata Shares set forth  therein  shall be deemed to be amended
to  reflect  each  Lender's  share  of the  Commitments,  giving  effect  to the
assignment  and (b) the Assignee  Lender shall,  from the effective  date of the
instrument of assignment and assumption,  be subject to all of the  obligations,
and  entitled  to all of the  rights,  of a Lender  hereunder,  except as may be
expressly  provided to the contrary in the  Assignment  and  Assumption.  To the
extent the  obligations  hereunder  of the  Assignor  Lender are  assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor  Lender  pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such  assignment,  the Assignor  Lender,  the Assignee  Lender,  the Assignee
Lender's  address  for  notice  purposes  and the amount of the  Commitments  so
assigned.

                           .3  Subject  to  the   limitations  of  this  Section
11.10.3, any Lender may also grant, from time to time,  participation  interests
in the  interests of such Lender under this  Agreement,  the Notes and the other
Loan Documents to any other financial institution without notice to, or approval
of, any Borrower or FSI. The grant of such a participation  interest shall be on
such terms as the granting Lender determines are appropriate, provided only that
(a) the holder of such  participation  interest shall not have any of the rights
of a  Lender  under  this  Agreement  except,  if  the  participation  agreement
expressly  provides,  rights under Sections 2.9, 2.10, 5.1 and 10.2, and (b) the
consent of the holder of such a participation interest shall not be required for
amendments  or waivers of provisions  of the Loan  Documents  other than, if the
participation  agreement  expressly  provides,  those  which  (i)  increase  the
monetary amount of any  Commitment,  (ii) decrease any fee or any other monetary
amount  payable to  Lenders,  or (iii)  extend the date upon which any  monetary
amount is payable to Lenders.

         . This Agreement and any amendments,  waivers,  consents or supplements
hereto may be executed in any number of counterparts,  and by different  parties
hereto in separate  counterparts,  each of which when so executed and  delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument. Each such agreement shall become effective upon
the execution of a counterpart  hereof or thereof by each of the parties  hereto
or thereto, delivery of each such counterpart to Agent.

         . Borrowers  and FSI  recognize  that, in the event any Borrower or FSI
fails to perform,  observe or discharge any of its  obligations  or  liabilities
under this Agreement, the Notes or any of the other Loan Agreements,  any remedy
at law may  prove to be  inadequate  relief  to  Lenders  or  Agent;  therefore,
Borrowers and FSI agree that Lenders or Agent,  if Lenders or Agents so request,
shall be entitled to temporary and permanent  injunctive relief in any such case
without the necessity of proving actual damages.

         . EACH  BORROWER  AND FSI HEREBY  AGREE  THAT EACH  SHALL  GIVE  PROMPT
WRITTEN  NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT  BELIEVES IT HAS, OR MAY SEEK
TO ASSERT OR ALLEGE AGAINST ANY LENDER OR AGENT,  WHETHER SUCH CLAIM IS BASED IN
LAW OR EQUITY,  ARISING UNDER OR RELATED TO THIS AGREEMENT,  THE NOTES OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO THE LOANS  CONTEMPLATED  HEREBY OR THEREBY OR ANY
ACT OR  OMISSION TO ACT BY ANY LENDER OR AGENT WITH  RESPECT  HERETO OR THERETO,
AND THAT IF IT SHALL FAIL TO GIVE SUCH PROMPT NOTICE TO AGENT WITH REGARD TO ANY
SUCH CLAIM OR CAUSE OF ACTION,  IT SHALL BE DEEMED TO HAVE WAIVED,  AND SHALL BE
FOREVER  BARRED FROM BRINGING OR ASSERTING  SUCH CLAIM OR CAUSE OF ACTION IN ANY
SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY.

         . NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
EACH  BORROWER  AND FSI HEREBY  AGREE  THAT EACH SHALL NOT SEEK FROM  LENDERS OR
AGENT, UNDER ANY THEORY OF LIABILITY,  INCLUDING, WITHOUT LIMITATION, ANY THEORY
IN TORTS, ANY PUNITIVE DAMAGES.

         . The  relationship  between  Borrowers  and FSI, on the one hand,  and
Lenders and Agent, on the other, is, and at all time shall remain solely that of
a borrower and lenders.  Neither Lenders nor Agent shall under any circumstances
be  construed  to be partners or joint  venturers  of Borrowers or FSI or any of
their Affiliates;  nor shall Lenders nor Agent under any circumstances be deemed
to be in a relationship of confidence or trust or a fiduciary  relationship with
Borrowers or FSI or any of their Affiliates, or to owe any fiduciary duty to any
Borrower or any of its Affiliates.  Lenders and Agent do not undertake or assume
any  responsibility  or duty to Borrowers or FSI or any of their  Affiliates  to
select,  review,  inspect,  supervise,  pass judgment  upon or otherwise  inform
Borrowers or any of their  Affiliates  of any matter in  connection  with its or
their Property,  any collateral held by Agent or any Lender or the operations of
Borrowers  or FSI or any of  their  Affiliates.  Borrowers  and  each  of  their
Affiliates  shall  rely  entirely  on their own  judgment  with  respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information  undertaken or assumed by any Lender or Agent in connection  with
such  matters is solely for the  protection  of  Lenders  and Agent and  neither
Borrowers nor any Affiliate is entitled to rely thereon.

         . Each  Borrower and FSI agrees that its liability  hereunder  shall be
the immediate,  direct,  and primary  obligation of such Borrower or FSI, as the
case may be,  and shall  not be  contingent  upon the  Agent's  or any  Lender's
exercise or  enforcement  of any remedy it may have against any other  Borrower,
FSI or any other  person,  or against any  collateral  or any  security  for the
Obligations.  Without limiting the generality of the foregoing,  the Obligations
shall  remain  in full  force  and  effect  without  regard  to and shall not be
impaired  or  affected  by,  nor shall such  Borrower  or FSI be  exonerated  or
discharged by, any of the following events:

                           .1    Insolvency,     bankruptcy,     reorganization,
arrangement,  adjustment,  composition, assignment for the benefit of creditors,
death,  liquidation,  winding up or dissolution of any Borrower or any guarantor
of the Obligations of any Borrower;

                           .2 Any  limitation,  discharge,  or  cessation of the
liability of any other  Borrower or any  guarantor for the  Obligations  of such
other Borrower due to any statute,  regulation or rule of law, or any invalidity
or  unenforceability  in  whole  or in  part  of the  documents  evidencing  the
Obligations  of such other  Borrower or any guaranty of the  Obligations of such
other Borrower;

                           .3 Any merger,  acquisition,  consolidation or change
in structure of any Borrower or any guarantor of the Obligations of any Borrower
or any sale,  lease,  transfer or other disposition of any or all of the assets,
shares or interests in or of any Borrower or any guarantor of the Obligations of
any Borrower;

                           .4 Any assignment or other  transfer,  in whole or in
part, of any Lender's interests in and rights under this Agreement or any of the
other Loan Documents,  including,  without  limitation,  any assignment or other
transfer, in whole or in part, of Banks' interests in and to any collateral;

                           .5 Any claim, defense,  counterclaim or setoff, other
than  that of prior  performance,  that any  Borrower  or any  guarantor  of the
Obligations of any Borrower may have or assert,  including,  but not limited to,
any defense of incapacity or lack of corporate or other authority to execute any
documents relating to the Obligations of any Borrower or any collateral;

                           .6 Agent's or any Lender's  amendment,  modification,
renewal,  extension,  cancellation  or surrender of any  agreement,  document or
instrument  relating to this  Agreement,  the Obligations of any Borrower or any
collateral, or any exchange, release, or waiver of any collateral;

                           .7 Agent's or any Lender's exercise or nonexercise of
any power,  right or remedy with respect to the  Obligations  of any Borrower or
any  collateral,  including,  but  not  limited  to,  the  compromise,  release,
settlement or waiver with or of any Borrower or any other person;

                           .8 Agent's or any Lender's vote, claim, distribution,
election,  acceptance,  action or inaction in any bankruptcy case related to the
Obligations of any Borrower or any collateral; and

                           .9 Any  impairment or invalidity of any collateral or
any failure to perfect any of Agent's liens thereon.

         .  Each  Borrower  and  FSI  hereby  expressly  waives  (a)  diligence,
presentment,  demand for payment and protest  affecting any other  Borrower's or
FSI's liability under the Loan Documents; (b) discharge due to any disability of
any  Borrower  or  FSI;  (c)  any  defenses  of  any  other  Borrower  or FSI to
obligations  under the Loan Documents not arising under the express terms of the
Loan  Documents or from a material  breach  thereof by Agent or any Lender which
under  applicable law has the effect of discharging  any other Borrower from the
Obligations of any Borrower as to which this Agreement is sought to be enforced;
(d) the benefit of any act or omission by Agent or any Lender which  directly or
indirectly  results in or aids the  discharge of any other  Borrower from any of
the  Obligations of any such Borrower by operation of law or otherwise;  (e) all
notices whatsoever,  including, without limitation,  notice of acceptance of the
incurring  of the  Obligations  of any  Borrower;  (f) any  right it may have to
require  Agent or any Lender to  disclose  to it any  information  that Agent or
Lenders may now or hereafter acquire  concerning the financial  condition or any
circumstances  that  bear  on the  risk of  nonpayment  by any  other  Borrower,
including the release of such other Borrower from its Obligations hereunder; and
(g) any requirement that Agent and Lenders exhaust any right, power or remedy or
proceed  against any other  Borrower or any other security for, or any guarantor
of, or any other party liable for, any of the  Obligations  of any Borrower,  or
any portion thereof  (including without limitation any requirements set forth in
Section 26-7 of the North Carolina General Statutes). Each Borrower specifically
agrees that it shall not be necessary or required,  and  Borrowers  shall not be
entitled to require, that Agent or any Lender (i) file suit or proceed to assert
or obtain a claim for personal  judgment  against any other  Borrower for all or
any part of the Obligations of any Borrower;  (ii) make any effort at collection
or  enforcement  of all or any part of the  Obligations of any Borrower from any
Borrower;  (iii) foreclose against or seek to realize upon any collateral or any
other security now or hereafter  existing for all or any part of the Obligations
of any  Borrower;  (iv)  file  suit or  proceed  to obtain or assert a claim for
personal  judgment  against any Borrower or any  guarantor or other party liable
for all or any part of the  Obligations of any Borrower;  (v) exercise or assert
any other  right or remedy to which Agent or any Lender is or may be entitled in
connection  with the  Obligations  of any  Borrower or any  security or guaranty
relating  thereto  to  assert;  or (vi)  file any  claim  against  assets of one
Borrower  before or as a  condition  of  enforcing  the  liability  of any other
Borrower under this Agreement or the Notes.

         . Except as otherwise  expressly provided in any of the Loan Documents,
in  all  respects,   including  all  matters  of   construction,   validity  and
performance,  this  Agreement and the  Obligations  arising  hereunder  shall be
governed by, and  construed  and enforced in  accordance  with,  the laws of the
State of North  Carolina  applicable  to  contracts  made and  performed in such
state,  without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.

         . Each  Borrower  and FSI hereby  irrevocably  consent to the  personal
jurisdiction  of the state and federal  courts  located in  Mecklenburg  County,
North  Carolina,  in any action,  claim or other  proceeding  arising out of any
dispute  in  connection  with  this  Agreement,  the  Note  and the  other  Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. Each Borrower hereby irrevocably consents to the
service of a summons and  complaint  and other  process in any action,  claim or
proceeding  brought by Agent or any Lender in connection  with this Agreement or
the other Loan Documents, any rights or obligations hereunder or thereunder,  or
the  performance  of such  rights  and  obligations,  on behalf of itself or its
Property, in the manner specified in Section 11.3. Nothing in this Section 11.19
shall affect the right of the Agent or any Lender to serve legal  process in any
other  manner  permitted by  applicable  law or affect the right of Agent or any
Lender to bring any action or proceeding  against any Borrower or its properties
in the courts of any other jurisdictions.

         . This  Agreement  is not intended to be, and shall not be construed to
create, a novation or accord and satisfaction, and, except as otherwise provided
herein,  the Growth Fund  Agreement,  as executed and delivered on September 27,
1995, shall remain in full force and effect.  Without limiting the generality of
the  foregoing,  Section  10.2 of the Growth Fund  Agreement  shall  survive the
effectiveness  of the  Agreement and shall remain  enforceable  against both the
Borrowers and EGF II.

         . TO THE EXTENT  PERMITTED BY APPLICABLE LAW, EACH BORROWER AND FSI, BY
EXECUTION  HEREOF,  AND  THE  AGENT  AND  EACH  LENDER,  BY  ACCEPTANCE  HEREOF,
KNOWINGLY,  VOLUNTARILY  AND  INTENTIONALLY  WAIVE ANY RIGHT  THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION  BASED ON THIS AGREEMENT,  OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE  EXECUTED IN  CONNECTION  WITH THIS  AGREEMENT,  OR ANY COURSE OF CONDUCT,
COURSE OF  DEALING,  STATEMENTS  (WHETHER  VERBAL OR  WRITTEN) OR ACTIONS OF ANY
PARTY WITH RESPECT HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES EXECUTED AND DELIVERED BY
EACH BORROWER PURSUANT TO THIS AGREEMENT.

         WITNESS the due  execution  hereof by the  respective  duly  authorized
officers of the undersigned as of the date first written above.

BORROWER                           PLM EQUIPMENT GROWTH FUND III

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       -----------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer


                                   PLM EQUIPMENT GROWTH FUND IV

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       -----------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer



                                   PLM EQUIPMENT GROWTH FUND V

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       ------------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer

                                   PLM EQUIPMENT GROWTH FUND VI

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       ------------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer


                                   PLM EQUIPMENT GROWTH & INCOME FUND VII

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       -----------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer


                                   PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, 
                                   L.L.C.

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS MANAGER


                                   By  /s/ J. Michael Allgood
                                       ------------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer

                                   Notice to any Borrower to be sent to:

                                   [Insert name of Borrower]
                                   c/o PLM Financial Services, Inc.
                                   One Market Plaza
                                   Steuart Street Tower, Suite 900
                                   San Francisco, CA  94105
                                   Attention:     J. Michael Allgood
                                   Vice President of Finance
                                   and Chief Financial Officer
                                   Telephone:     415/974-1399
                                   Telecopy:      415/882-0860

                                   With a copy to:

                                   TEC AcquiSub, Inc.
                                   One Market Plaza
                                   Steuart Street Tower, Suite 900
                                   San Francisco, CA  94105
                                   Attention:     General Counsel
                                   Telephone:     415/896-1138
                                   Facsimile:     415/882-0860

FSI                                PLM FINANCIAL SERVICES, INC.


                                   By  /s/ J. Michael Allgood
                                       -----------------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer

                                   Notice to be sent to:

                                   PLM Financial Services, Inc.
                                   One Market Plaza
                                   Steuart Street Tower, Suite 900
                                   San Francisco, CA  94105
                                   Attention:     J. Michael Allgood
                                                  Vice President of Finance
                                                  and Chief Financial Officer
                                   Telephone:     415/974-1399
                                   Telecopy:      415/882-0860

AGENT                              FIRST UNION NATIONAL BANK
                                   OF NORTH CAROLINA


                                   By  /s/ Bill A. Shirley
                                       -----------------------------------
                                       Bill A. Shirley
                                       Vice President

                                   Notice to be sent to:

                                   First Union National Bank of North Carolina
                                   One First Union Center
                                   301 South College Street
                                   Charlotte, NC  28288
                                   Attention:     Milton Anderson,
                                                  Director
                                   Telephone:     704/383-5164
                                   Facsimile:     704/374-4092

LENDERS                            FIRST UNION NATIONAL BANK
                                   OF NORTH CAROLINA


                                   By  /s/ Bill A. Shirley
                                       ----------------------------------- 
                                       Bill A. Shirley
                                       Vice President


                                   Notice to be sent to:

                                   First Union National Bank of North Carolina
                                   One First Union Center
                                   301 South College Street
                                   Charlotte, NC  28288
                                   Attention:     Milton Anderson,
                                                  Director
                                   Telephone:     704/383-5164
                                   Facsimile:     704/374-4092


The undersigned acknowledges and agrees to Section 11.20 of this Agreement.

                                   PLM EQUIPMENT GROWTH FUND II

                                   BY PLM FINANCIAL SERVICES, INC.,
                                   ITS GENERAL PARTNER


                                   By  /s/ J. Michael Allgood
                                       -----------------------------------
                                       J. Michael Allgood
                                       Chief Financial Officer


<PAGE>


                                   SCHEDULE A

                                  (COMMITMENTS)


                                                                    Pro
                                                                   Rate
Lender                               Commitment                    Share

First Union National Bank            $35,000,000                   35/35 x 100%
 of North Carolina