EXHIBIT 10.17

                          DATED                   1998

                               EUROPEAN MICRO PLC
                                   as Borrower

                                       and

                          NATIONAL WESTMINSTER BANK PLC
                                     as Bank

             ------------------------------------------------------

                                CREDIT AGREEMENT
                                  RELATING TO A
                   BILATERAL STERLING REVOLVING LOAN FACILITY
                       OF UP TO /POUND STERLING/3,500,000

             ------------------------------------------------------

                                   WILDE SAPTE
                                  1 Fleet Place
                                 London EC4M 7WS

                               Tel. 0171 246 7000
                               Fax. 0171 246 7777
                        REF. # LVM/GP/128274/BF323501.06


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                                TABLE OF CONTENTS

CLAUSE   HEADING                                           PAGE NO.

1.       DEFINITIONS AND INTERPRETAION.........................1
1.1      Definitions  .........................................1
1.2      Headings .............................................9
1.3      Intepretation.........................................9

2.       FACILITY ............................................10

3.       PURPOSE .............................................10
3.1      Purpose .............................................10
3.2      No monitoring........................................10

4.       CONDITIONS PRECENDENT................................10

5.       DRAWDOWN ............................................11
5.1      Commitment Period....................................11
5.2      Conditions to each Advance...........................11
5.3      Drawdown Notice......................................11
5.4      Limitations on Advances..............................11
5.5      Advances ............................................12

6.       INTEREST ............................................12
6.1      Interest rate........................................12
6.2      Interest Periods.....................................12
6.3      Default interest.....................................13
6.4      Calculation and payment of interest..................13
6.5      Bank's determination.................................13

7.       REPAYMENT AND PREPAYMENT.............................13
7.1      Repayment ...........................................13
7.2      Prepayment ..........................................14

8.       CANCELLATION ........................................15
8.1      Cancellation ........................................15
8.2      Notice ..............................................15
8.3      Effect of cancellation...............................15
8.4      Limitation ..........................................15

9.       CHANGES IN CIRCUMSTANCES.............................15
9.1      Illegality ..........................................15
9.2      Increased Costs......................................15
9.3      Market disruption....................................17
9.4      Mitigation ..........................................17
9.5      Certificates ........................................18

10.      PAYMENTS ............................................18
10.1     Funds ...............................................18
10.2     Payments ............................................18
10.3     Change of account....................................18
10.4     Business Days........................................18
10.5     Currency ............................................18

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10.6     Accounts as evidence.................................18
10.7     Partial payments.....................................19
10.8     Set-off and counterclaim.............................19
10.9     Grossing-up  ........................................19

11.      SECURITY ............................................21

12.      REPRESENTATIONS AND WARRANTIES.......................21
12.1     Representations and warranties.......................21
12.2     Repetition ..........................................23

13.      UNDERTAKINGS ........................................24
13.1     Information undertakings.............................24
13.2     Positive undertakings................................26
13.3     Negative undertakings................................27
13.4     Financial undertakings...............................28

14.      DEFAULT ............................................#28
14.1     Default ............................................#28
14.2     Acceleration .......................................#30

15.      SET-OFF  ............................................31

16.      FEES AND EXPENSES....................................31
16.1     Expenses ............................................31
16.2     Drawdown fee ........................................31
16.3     Commitment fee......................................#31
16.4     Documentary Taxes indemnity..........................32
16.5     VAT .................................................32
16.6     Indemnity payments...................................32

17.      WAIVERS; REMEDIES CUMULATIVE.........................32

18.      MISCELLANEOUS........................................33
18.1     Severance ...........................................33
18.2     Counterparts ........................................33
18.3     Entire agreement.....................................33

19.      NOTICES .............................................33
19.1     Method ..............................................33
19.2     Delivery ............................................33
19.3     Addresses .. ........................................33
19.4     Deemed receipt.......................................34

20.      ASSIGNMENTS AND TRANSFERS............................34
20.1     Benefit of Agreement.................................34
20.2     Assignments and transfers by Borrower................34
20.3     Assignments by Bank..................................34
20.4     Transfers by Bank....................................34
20.5     Consequences of transfer.............................35
20.6     Disclosure of information............................35

21.      INDEMNITIES .........................................35
21.1     Breakage costs indemnity.............................35
21.2     Currency indemnity...................................35
21.3     General .............................................36

22.      LAW .................................................36


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SCHEDULE 1 CONDITIONS PRECEDENT...............................37
SCHEDULE 2 DRAWDOWN NOTICE....................................38
SCHEDULE 3 - Part 1 - GROUP COMPANIES.........................40
SCHEDULE 3 - Part 2 - MATERIAL COMPANIES......................40
SCHEDULE 4 MANDATORY # COST RATE FORMULA......................41


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THIS AGREEMENT is made on                  1998

BY:

(1)      EUROPEAN MICRO PLC, a company incorporated in England and Wales with
         registered number 2663964 (the "Borrower"); and

(2)      NATIONAL WESTMINSTER BANK PLC as the Bank (as that term is more
         particularly defined below)

IT IS AGREED as follows:

1.       DEFINITIONS AND INTERPRETATION

1.1.     DEFINITIONS

         In this Agreement:

         "ACCOUNTS" means the audited consolidated accounts (including all
         additional information and notes to the accounts) of the Borrower
         together with the relevant directors' report and auditors' report.

         "ADVANCE" means in advance made or to be made to the Borrower under the
         Facility or, as the case may be, the outstanding principal amount of
         any such advance.

         "AUDITORS" means Messrs KPMG Peat Marwick or any other firm of
         chartered accountants of internationally recognised standing that has
         been appointed as auditors of the Borrower.

         "AVAILABLE FACILITY" means the Facility Limit less the Loan.

         "BANK" means National Westminster Bank Plc and its successors in title,
         assignees and transferees.

         "BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
         banks and foreign exchange markets are open for business in London.

         "CERTIFIED COPY" means, in relation to a document, a copy of that
         document bearing the endorsement "Certified a true, complete and
         accurate copy of the original, which has not been amended otherwise
         than by a document, a Certified Copy of which is attached hereto",
         which has been signed and dated by a duly authorised officer of the
         relevant company and which complies with that endorsement.

         "CHANGE" means, in relation to the Bank (or any company of which the
         Bank is a Subsidiary), the introduction, implementation, repeal,
         withdrawal or change in, or in the interpretation or application of,
         (a) any law, regulation, practice or concession, or (b) any directive,
         requirement, request or guidance (whether or not having the force of
         law but if not having the force of law, one which applies generally to
         a class or category of financial institutions of which the Bank (or
         that company) forms part and compliance with which is in accordance
         with the general practice of those financial institutions) of the
         European Community, any central bank including the European Central
         Bank, or any other fiscal, monetary, regulatory or other authority.

                                       -1-

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           "COMMITMENT PERIOD" means the period starting on the date of this
           Agreement and ending on the date falling 3 days before the Final
           Repayment Date.

           "COMPOSITE GUARANTEE" means a composite guarantee in respect of the
           obligations of the other Group Companies to the Bank in the Bank's
           standard form.

           "DANGEROUS MATERIALS" means any element or substance, whether
           consisting of gas, liquid, solid or vapour, identified by any
           Environmental Law to be, to have been, or to be capable of being or
           becoming, harmful to mankind or any living organism or damaging to
           the Environment.

           "DEFAULT" means any event specified as such in Clause 14.1.

           "DELIVERY NOTE" means the delivery note to be attached to a Drawdown
           Notice in accordance with Clause 5.3.

           "DEPRECIATION" has the meaning given to that term by GAAP.

           "DISPOSAL" means a sale, transfer or other disposal (including by way
           of lease or loan) by a person of all or part of its assets, whether
           by one transaction or a series of transactions and whether at the
           same time or over a period of time.

           "DRAWDOWN DATE" means the date on which an Advance is made, or is
           proposed to be made.

           "DRAWDOWN NOTICE" means a notice substantially in the form set out in
           Schedule 2.

           "ELIGIBLE DOCTORS" means the trade debtors of the Group at any time 
           but excluding:

           (a) any debts which are more than 90 days past the due date for
               payment;

           (b) any debts which have been assigned to LND pursuant to the Invoice
               Discounting Agreement; and

           (c) any debts that are subject to any factoring or similar
               arrangement which any member of the Group may enter into.

           "ELIGIBLE INVENTORY" means any product manufactured by a Nominated
           Manufacturer which is a current model of such Nominated Manufacturer
           and which is capable of being discounted under the Invoice
           Discounting Agreement.

           "ENCUMBRANCE" means any mortgage, charge, assignment by way of
           security, pledge, hypothecation, lien, right of set-off, retention of
           title provision, trust or flawed asset arrangement (for the purpose
           of, or which has the effect of, granting security) or any other
           security interest of any kind whatsoever, or any agreement, whether
           conditional or otherwise, to create any of the same, or any agreement
           to sell or otherwise dispose of any asset on terms whereby such asset
           is or may be leased to or re-acquired or acquired by any Material
           Company.

           "ENVIRONMENTAl" means all or any of the following media: air
           (including air within buildings or other structures and whether above
           or below ground); land (including buildings and any other structures
           or erections in, on or under it and any soil and anything below the
           surface of land); land covered with water; and water (including sea,
           ground and surface water).

                                      -2-

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           "ENVIRONMENTAL LAW" means any statutory or common law, treaty,
           convention, directive or regulation having legal or judicial effect
           whether or a criminal or civil nature, concerning:

           (a) pollution or contamination of the Environment;

           (b) harm, whether actual or potential, to mankind and human senses,
               living organisms and ecological systems;

           (c) the generation, manufacture, processing, distribution, use
               (including abuse), treatment, storage, disposal, transport
               or handling of Dangerous Materials; or

           (d) the emission, leak, release or discharge into the
               Environment of noise, vibration, dust, fumes, gas, odours,
               smoke, steam, effluvia, heat, light, radiation (of any
               kind), infection, electricity or any Dangerous Material
               and any matter or thing capable of constituting a nuisance
               or an actionable tort of any kind in respect of such
               matters.

           "EXCEPTIONAL ITEMS" has the meaning given to that term in FRS3, but
           excluding those items listed in paragraph 20 of FRS3.

           "FACILITY" means the Sterling revolving loan facility granted to the
           Borrower under this Agreement.

           "FACILITY LIMIT" means, subject to Clause 5.4, (pound)3,5000,000, as
           reduced or cancelled in accordance with this Agreement.

           "FACILITY PERIOD" means the period starting on the date of this
           Agreement and ending on the date on which all the obligations and
           liabilities of the Material Companies under the Financing Documents
           are discharged in full and the Bank has no continuing obligation in
           relation to the Facility.

           "FINAL REPAYMENT DATE" means the date falling 364 days after the date
           of this Agreement.

           "FINANCE LEASE" means any lease, hire agreement, credit sale
           agreement, purchase agreement, conditional sale agreement or
           installment sale and purchase agreement which should be treated in
           accordance with SSAP 21 (or any successor to SSAP 21) as a finance
           lease or in the same way as a finance lease.

           "FINANCIAL YEAR", in relation to a company, has the meaning given to
           that term in section 223 of the Companies Act 1985.

           "FINANCING DOCUMENTS" means this  Agreement and the Security # 
           documents.

           "FREE STOCK" means the stock in trade of the Group which is not
           subject to any claims under reservation of title, liens or otherwise.

           "FRS" together with a number means the financial reporting standard
           issued by the Accounting Standards Board for application in England
           and Wales and identified by reference to that number.

           "GAAP" means, in relation to a company, accounting principles,
           concepts, bases and policies generally adopted and accepted in the
           jurisdiction of its incorporation.

                                      -3-

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           "GROUP" means the Borrower and its Subsidiaries; and "GROUP COMPANY"
           means any of them.

           "INDEBTEDNESS" means, in relation to a person its obligation (whether
           present or future, actual or contingent, as principal or surety) for
           the payment or repayment of money (whether in respect of interest,
           principal or otherwise) incurred in respect of:

           (a) moneys borrowed or raised;

           (b) any bond, note, loan stock, debenture or similar instrument;

           (c) any acceptance credit, bill discounting, note purchase, factoring
               or documentary credit facility;

           (d) the supply of any goods or services which is more than [45] days
               past the due  date;

           (e) any hire purchase agreement, conditional sale agreement or
               lease, where that agreement has been entered into
               primarily as a method of raising finance or financing the
               acquisition of an asset;

           (f) any guarantee, bond, stand-by letter of credit or other
               similar instrument issued in connection with the
               performance contracts;

           (g) any interest rate or currency swap agreement or any other hedging
               or derivatives instrument or agreement;

           (h) any arrangement pursuant to which any asset sold or
               otherwise disposed of by that person is or may be leased
               to or re-acquired by a Group Company (whether following
               the exercise of an option or otherwise); or

           (i) any guarantee, indemnity or similar insurance against
               financial loss given in respect of the obligation of any
               person.

           "INTEREST PERIOD" means each period determined in accordance with
           Clause 6 for the purpose of calculating interest on Advances or
           overdue amounts.

           "INVOICE DISCOUNTING AGREEMENT" means the invoice discounting
           agreement dated * and made between LND and the Borrower.

           "LENDING OFFICE" means the office set out under the Bank's name in
           Clause 19.3 or such other office in the United Kingdom through which
           the Bank maintains the Facility under this Agreement.

           "LIBOR" means, in relation to an Advance or other sum and in relation
           to a particular Interest Period:

           (a) the rate of the offered quotation for Sterling deposits
               for a period comparable to that Interest Period which
               appears on the display designated as "Page 3750" on the
               Telerate Service (or such other page or service as may
               replace it for the purpose of displaying London interbank
               offered rates of prime banks for Sterling deposits) at or
               about 11.00 a.m. on the first day of that Interest Period;
               or

                                      -4-

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           (b) if no such display rate is available, the rate per annum
               (rounded upwards to the nearest whole multiple of 1/16% at
               which the Bank was offering deposits in Sterling in an
               amount comparable with that Advance or other sum, as the
               case may be, to leading banks in the London interbank
               market for a period equal to that Interest Period at or
               about 11.00 a.m. on the first day of that Interest Period.

           "LOAN" means, at any time, the aggregate of all Advances outstanding
           at that time.

           "LND" means Lombard NatWest Discounting Limited.

           "MANDATORY # COST RATE" means the rate determined in accordance with
           Schedule 4#.

           "MARGIN" means 1.75 per cent per annum.

           "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
           ability of any Group Company to comply with its obligations under the
           Financing Documents or (b) the business, financial condition or
           assets of the Group taken as a whole.

           "MATERIAL COMPANY" means the Borrower and each Group Company at any
           time:

           (a) whose profits are equal to or greater than 5 per cent of the 
               aggregate profits of the Group; or

           (b) whose assets have a value equal to or greater than 5 per cent of
               the aggregate value of all assets owned by the Group.

           For the purpose of paragraph (a) above, profits shall be measured for
           each period of 6 months duration ending on a Quarter Date.

           "MORTGAGE DEBENTURE" means a mortgage debenture in the Bank's 
           standard form.

           "NET INDEBTEDNESS" means Indebtedness less cash at bank and cash at
           hand.

           "NOMINATED MANUFACTURERS" means IBM, Hewlett Packard and Compaq and
           "NOMINATED MANUFACTURER" shall be construed accordingly.

           "OPERATING BUDGET" means, in relation to the Group and the period of
           12 months starting not later than the date of this Agreement, the
           Operating Plan, and in relation to each successive 12 month period
           thereafter during the Facility Period:

           (a)        a  projected balance sheet;

           (b)        a projected profit and loss account;

                                      -5-

<PAGE>

           (c)        a projected cash flow statement; and

           (d)        projected covenant calculations relating to each financial
                      undertaking contained in Clause 13.4,

           relative to each such period and on a month by month basis and with a
           commentary drawing on the previous period's performance and forecast
           market conditions.

           "OPERATING PLAN" means the operating plan for the Group dated 5th
           February 1998.

           "PARTY" means a party to this Agreement.

           "PBIT" means, in relation to any period, the consolidated profit of
           the Group for that period (including, for the avoidance of doubt,
           Exceptional Items) before Taxation and Total Debt Costs, but
           excluding:

           (a)  profit attributable to  minority interests;

           (b)  Extraordinary Items;

           (c)  any profit or loss arising on the disposal of fixed assets;

           (d)  mounts written off the value of investments;

           (e)  amounts written off the value attributed to net goodwill arising
                on any acquisition after the date of this Agreement;

           (f)  income from participating interests in associated undertakings
                and income from any other fixed asset investment; and

           (g)  realised and unrealised exchange gains and losses.

           "PBITDA" means, in relation to any period, the aggregate of:

           (a)  PBIT; and

           (b)  Depreciation charged to the consolidated profit and loss account
                of the Group during that period.

           "PERMITTED ENCUMBRANCE" means:

           (a)  any Encumbrance subsisting under or in connection with any 
                Financing Document;

           (b)  any right of set-off arising by operation of law or in the 
                ordinary course of trading;

           (c)  any lien arising by operation of law in the ordinary course of
                trading;

           (d)  any Encumbrance arising out of retention of title
                provisions in a supplier's standard conditions of supply
                in respect of goods acquired by a Group Company in the
                ordinary course of trading; or

                                      -6-

<PAGE>

           (e)  any agreement entered into by a Group Company in the
                ordinary course of trading under which it is to sell or
                otherwise dispose of any asset on terms whereby such asset
                is or may be leased to or re-acquired or acquired by any
                Group Company.

           "PERMITTED INDEBTEDNESS" means:

           (a)  Indebtedness outstanding under any Financing Document;

           (b)  Indebtedness under any arrangement pursuant to which any
                asset sold or otherwise disposed of by any Group Company
                is or may be leased to or re-acquired by any Group Company
                where such arrangement was entered into in the ordinary
                course of trading; and

           (c)  Indebtedness under the Invoice Discounting Agreement.

           "POTENTIAL DEFAULT" means an event or omission which, with the giving
           of any notice, the lapse of time, the determination of materiality or
           the satisfaction of any other condition under Clause 14.1, would be a
           Default.

           "PRE SOLD" means Eligible Inventory which a customer has indicated
           orally (not more than 7 days before a Drawdown Date) or in writing
           (not more than 1 month before a Drawdown Date) it wishes to take
           delivery of.

           "QUALIFYING BANK" means an institution which is a bank for the
           purposes of section 349 of the Income and Corporation Taxes Act 1988.

           "QUARTER DATE" means 31st March, 30th June, 30th September, 31st
           December.

           "SECURITY # DOCUMENTS" means the documents listed in Column 3 of
           Schedule 3 and any other guarantee or document creating, evidencing
           or acknowledging security in respect of any of the obligations and
           liabilities of any Group Company under any Financing Document.

           "SSAP" together with a number means the statement of standard
           accounting practice issued by the Institute of Chartered Accountants
           for application in England and Wales and identified by reference to
           that number.

           "STERLING" and "(POUND)" means the lawful currency for the time being
           of the United Kingdom.

           "SUBSIDIARY" means a subsidiary within the meaning of section 736 of
           the Companies Act 1985.

           "TAXES" includes all present and future taxes, charges, imposts,
           duties, levies, deductions, withholdings or fees of any kind
           whatsoever, or any amount payable on account of or as security for
           any of the foregoing, by whomsoever on whomsoever and wherever
           imposed, levied, collected, withheld or assessed, together with any
           penalties, additions, fines, surcharges or interest relating thereto;
           and "Tax" and "Taxation" shall be construed accordingly.

           "TANGIBLE NET WORTH" means, on any date, the aggregate amount of the
           paid up share capital of the Borrower as at that date including
           amounts standing to the credit of the share premium account and any
           capital redemption reserves plus or minus, as the case

                                      -7-

<PAGE>

           may be, the aggregate amount standing in the Group's capital and
           revenue reserves (on a consolidated basis) as at that date:

           (a)        adjusted as may be appropriate to take account of any
                      variation in that share capital account and share premium
                      account since 30th June 1997;

           (b)        deducting any amounts attributable to any intangible asset
                      included as an asset in the Borrower's latest consolidated
                      balance sheet excluding amounts attributable to the net
                      goodwill arising on any acquisition after the date of this
                      Agreement;

           (c)        excluding any capital accounts or reserves derived from
                      any writing up of book value of any assets of any Group
                      Company above historic cost less accumulated Depreciation
                      at any time after the date of this Agreement;

           (d)        adding back any diminution due to the writing off of the
                      net goodwill arising on the any acquisition after the date
                      of this Agreement;

           (e)        excluding any minority interest arising on consolidation;

           (f)        including exchange gains and losses arising on
                      consolidation accounted for through reserves in accordance
                      with SSAP 20; and

           (g)        adding or deducting, as the case may be, any credit or any
                      debit balance on the Group's consolidated profit and loss
                      account [(but not to the extent that the same arises as a
                      result of any Extraordinary Items)] attributable to the
                      period in relation to which the calculation falls to be
                      made.

           "TOTAL DEBT" means at any time the aggregate (without double 
           counting) of:

           (a)        that part of the Indebtedness of Group Companies which
                      relates to obligations (whether present or future, actual
                      or contingent and whether incurred as principal or surety)
                      for the payment or repayment of money in respect of
                      principal incurred in respect of (i) moneys borrowed or
                      raised, (ii) any bond, note, loan stock, debenture or
                      similar instrument, or (iii) any acceptance credit, bill
                      discounting, note purchase, factoring or documentary
                      credit facility (including, for the avoidance of doubt,
                      any indebtedness under this Agreement); and

           (b)        the capital element of all rentals or, as the case may be,
                      other payments payable under any Finance Lease entered
                      into by any Group Company.

           "TOTAL DEBT COSTS" means, in relation to any period, the aggregate
           of:

           (a)        all interest, commissions and other financing charges 
                      payable by any Group Company in respect of that period;

           (b)        to the extent not included in paragraph (a) above, all
                      finance costs (as defined in FRS4) charged to the profit
                      and loss account of the Group in respect of that period;

           (c)        all amounts payable by any Group Company in respect of
                      that period under any interest rate protection agreement
                      (less any amounts receivable by any Group

                                      -8-

<PAGE>

                      Company in respect of that period under any interest rate
                      protection agreement); and

           (d)        the interest element of all rentals or, as the case may
                      be, other amounts payable in respect of that period under
                      any Fiancee Lease entered into by any Group Company.

           "VAT" means value added tax as provided for in the Value Added Tax
           Act 1994 and legislation (or purported legislation and whether
           delegated or otherwise) supplemental to that Act or in any primary or
           secondary legislation promulgated by the European Community or any
           official body or agency of the European Community, and any tax
           similar or equivalent to value added tax imposed by any country other
           than the United Kingdom and any similar or turnover Tax replacing or
           introduced in addition to any of the same.

1.2.       HEADINGS

           The headings in this Agreement are for convenience only and shall be
           ignored in construing this Agreement.

1.3.       INTERPRETATION

           In this Agreement (unless otherwise provided):

           (a)  words importing the singular shall include the plural and vice
                versa;

           (b)  references to Clauses and Schedules are to be construed as 
                references to the  clauses of, and schedules to, this Agreement;

           (c)  references to any Financing Document or any other document
                shall be construed as references to that Financing
                Document or that other document, as amended, varied,
                novated or supplemented, as the case may be;

           (d)  references to any statute or statutory provision include
                any statute or statutory provision which amends, extends,
                consolidates or replaces the same, or which has been
                amended, extended, consolidated or replaced by the same,
                and shall include any orders, regulations, instruments or
                other subordinate legislation made under the relevant
                statute;

           (e)  references to a document being "IN THE AGREED FORM" means
                that document the form and content of which has been
                approved by the Bank and which has endorsed on it the
                words "in the agreed form" and which is initialled by or
                on behalf of the Bank and the Borrower;

           (f)  references to "ASSETS" shall include revenues sand
                property and the right to revenues and property and rights
                of every kind, present, future and contingent and whether
                tangible or intangible (including uncalled share capital);

           (g)  the words "including" and "in particular" shall be
                construed as being by way of illustration or emphasis only
                and shall not be construed as, nor shall they take effect
                as, limiting the generality of any foregoing words;

           (h)  the words "other " and "otherwise" shall not be construed
                ejusdem generis with any foregoing words where a wider
                construction is possible;

                                      -9-

<PAGE>

           (i)  references to a "person" shall be construed so as to
                include that person's assigns, transferees or successors
                in title and shall be construed as including references to
                an individual, firm, partnership, joint venture, company,
                corporation, body corporate, unincorporated body of
                persons or any state or any agency of a state;

           (j)  where there is a reference in this Agreement to any
                amount, limit or threshold specified in Sterling, in
                ascertaining whether or not that amount, limit or
                threshold has been attained, broken or achieved, as the
                case may be, a non- Sterling amount shall be counted on
                the basis of the equivalent in Sterling of that amount
                using the Bank's relevant spot rate of exchange; and

           (k)  accounting terms shall be construed so as to be consistent with
                GAAP; and
           (l)  references to time are to London time.

2.         FACILITY

           Subject to the terms of this Agreement, the Bank agrees to make
           available to the Borrower a Sterling revolving credit facility in the
           maximum principal amount of (pound)3,5000,000.

3.         PURPOSE

3.1.       PURPOSE

           The Borrower shall use the proceeds of all Advances to purchase
           Eligible Inventory from Nominated Manufacturers.

3.2.       NO MONITORING

           The Bank shall not be obliged to investigate or monitor the use or
           application of the proceeds of the Advances.

4.         CONDITIONS PRECEDENT

           Notwithstanding any other term of this Agreement, the Bank shall not
           be under any obligation to make the Facility available to the
           Borrower unless it has notified the Borrower that all the conditions
           set out in Schedule 1 have been satisfied on or before 12th June
           1998.

5.         DRAWDOWN

5.1.       COMMITMENT PERIOD

           Subject to the terms of this Agreement, Advances shall be made to the
           Borrower at any time during the Commitment Period when requested by
           means of a Drawdown Notice in accordance with this Clause 5. At the
           close of business on the last day of the Commitment Period, the
           commitment of the Bank under the Facility shall be automatically
           cancelled.

                                      -10-

<PAGE>

5.2.       CONDITIONS TO EACH ADVANCE

           The obligation of the Bank to make available each Advance is subject
           to the conditions that on the date on which the relevant Drawdown
           Notice is given and on the Drawdown Date:

           (a)        the representations and warranties in Clause 12 to be
                      repeated on those dates are correct and will be correct
                      immediately after the Advance is made; and

           (b)        no Default or Potential Default has occurred and is
                      continuing or would occur on the making of the Advance.

5.3.       DRAWDOWN NOTICE

5.3.1.     Whenever the Borrower wishes to draw down under the Facility, it
           shall deliver to the Bank not later than 10.30 a.m. on the Drawdown
           Date:

           (a)        a duly completed Drawdown Notice confirming:

                      (i)       the proportion of the Eligible Inventory which
                                is Pre Sold; and

                      (ii)      that Disposal of the Eligible Inventory will
                                take place before the expiry of the relevant
                                Interest Period

           (b)        a copy of the delivery note in respect of which the 
                      Advance is to be made  identifying the Eligible Inventory

5.3.2.     A Drawdown Notice shall be irrevocable and the Borrower shall be
           obliged to borrow in accordance with its terms.

5.4.       LIMITATIONS ON ADVANCES

           The following limitations apply to Advances:

           (a)        the Drawdown Date of an Advance shall be a Business Day
                      falling before the  end of the Commitment Period;

           (b)        the principal amount of an Advance shall be:

                      (i)       a minimum amount of(pound)250,000 and an
                                integral multiple of(pound)50,000; or

                      (ii)      the amount of the Available Facility;

            (c)       no Advance shall be made if the making of that Advance 
                      would result in the Loan exceeding the Facility Limit;

           (d)        no more than 10 Advances may be outstanding at any one
                      time;

           (e)        the amount of an Advance shall not exceed:

                      (i)       75 per cent of the purchase price of the
                                Eligible Inventory as shown in the relevant
                                Delivery Note where at least 30 per cent of such
                                Eligible Inventory is Pre Sold; or

                                      -11-

<PAGE>

                      (ii)      65 per cent of the purchase price of the
                                relevant Eligible Inventory as shown in the
                                relevant Delivery Note where less than 30 per
                                cent of such Eligible Inventory is Pre Sold; and

           (f)        a separate Advance must be made in respect of each 
                      Delivery Note.

5.5.       ADVANCES

           Subject to the terms of this Agreement, the Bank acting through its
           Lending Office shall make available to the Borrower on the Drawdown
           Date for an Advance an amount equal to that Advance.

6.         INTEREST

6.1.       INTEREST RATE

           Interest shall accrue on each Advance from and including the relevant
           Drawdown Date to but excluding the date the Advance is repaid at the
           rate determined by the Bank to be the aggregate of:

           (a)        the Margin;

           (b)        LIBOR; and

           (c)        the Mandatory # Cost Rate.

6.2.       INTEREST PERIODS

6.2.1.     The Borrower shall select an Interest Period for an Advance in the 
           relevant Drawdown  Notice of 1 day, 7 day's, 14 day's or 1 month's
           duration (or such other Interest Period as the Bank may allow).

6.2.2.     If an Interest Period would otherwise end on a day which is not a
           Business Day, that Interest Period shall instead end on the next
           Business Day in the same calendar month (if there is one) or the
           preceding Business Day (if there is not).

6.2.3.     If an Interest Period begins on the last Business Day in a calendar
           month or on a Business Day for which there is no numerically
           corresponding day in the calendar month in which that Interest Period
           is to end, it shall end on the last Business Day in that later
           calendar month.

6.2.4.     If an Interest Period would otherwise extend beyond the Final
           Repayment Date, it shall be shortened so that it ends on the Final
           Repayment Date.

6.3.       DEFAULT INTEREST

6.3.1.     If the Borrower fails to pay any amount payable under any Financing
           Document on the due date, it shall pay default interest on the
           overdue amount from the due date to the date of actual payment
           calculated by reference to successive Interest Periods (each of such
           duration as the Bank may select and the first beginning on the
           relevant due date) at the rate per annum being the aggregate of (a) 2
           per cent per annum, (b) the Margin, (c) LIBOR and (d) the Mandatory #
           Cost Rate.

6.3.2.     So long as the overdue amount remains unpaid, the default interest
           rate shall be recalculated in accordance with the provisions of this
           Clause 6.3 on the last day of each

                                      -12-

<PAGE>

           such Interest Period and any unpaid interest shall be compounded at
           the end of each Interest Period.

6.4.       CALCULATION AND PAYMENT OF INTEREST

6.4.1.     At the beginning of each Interest Period, the Bank shall notify the
           Borrower of the rate and amount of interest payable for the Interest
           Period (but in the case of any default interest calculated under
           Clause 6.3, any such notification need not be made more frequently
           than weekly). Each notification shall set out in reasonable detail
           the basis of computation of the amount of interest payable.

6.4.2.     Interest due from the Borrower under this Agreement shall:

           (a)        accrue from day to day at the rate calculated under this 
                      Clause 6;

           (b)        except as otherwise provided in this Agreement, be paid by
                      the Borrower to the Bank in arrear on the last day of each
                      Interest Period;

           (c)        be calculated on the basis of the actual number of days 
                      elapsed and a 365 day  year; and

           (d)        be payable  both before and after judgment.

6.5.       BANK'S DETERMINATION

           The determination by the Bank of any interest payable under this
           Clause 6 shall be conclusive and binding on the Borrower in the
           absence of manifest error.

7.         REPAYMENT AND PREPAYMENT

7.1.       REPAYMENT

7.1.1.     Subject to Clause 7.1.3, the Borrower shall repay each Advance in
           full on the last day of the Interest Period relating to that Advance.

7.1.2.     Subject to the terms of this Agreement, any amounts repaid under this
           Agreement may be re-borrowed.

7.1.3.     Subject to Clause 7.1.4, if all or part of an existing Advance made
           to the Borrower is to be repaid from the proceeds of all or part of a
           new Advance to be made to the Borrower, then the amount to be repaid
           by the Borrower shall be set off against the amount to be advanced by
           the Bank in relation to the new Advance and the party to whom the
           smaller amount is to be paid shall pay to the other party a sum equal
           to the difference between the two amounts.

7.1.4.     Only Advances with an Interest Period of 1 day's duration may be
           repaid from the proceeds of a new Advance and in any event no Advance
           shall be repaid by a new Advance more than 3 times.

7.2.       PREPAYMENT

           Subject to Clauses 9, 10 and 21 the Borrower may not prepay any 
           Advance before the end of its Interest Period.

7.3.       EXTENSIONS TO COMMITMENT PERIOD

                                      -13-

<PAGE>

7.3.1.     The Borrower may at any time by notice to the Bank request an
           extension to the Commitment Period, subject to the provisions of this
           Clause 7.3.

7.3.2.     Upon receipt of any such request, the Bank shall undertake a full
           credit assessment of the Borrower. The Bank shall be under no legal
           or moral obligation to extend the Commitment Period. No extension
           shall be effective unless agreed in writing by the Bank.

7.3.3.     If the Borrower requests an extension during the final thirty days of
           the Commitment Period, the Bank shall, at its absolute discretion,
           have the option:

           (a)        (subject to Clause 7.3.2) to extend the Commitment Period
                      for a further period of 364 days from the date on which
                      the Commitment Period is then due to expire; or

           (b)        to decline such request.

7.3.4.     If the Borrower requests an extension otherwise than in accordance
           with Clause 7.3.3., the Bank shall, at its absolute discretion, have
           the option:

           (a)        (subject to Clause 7.3.2) to extend the Commitment Period
                      for a further period of 364 days from the date on which
                      the Bank gives written notice to the Borrower of the
                      Bank's agreement to extend the Commitment Period; or

           (b)        to decline such request, in which event, the Bank may, at
                      or after the time of such request, immediately cancel the
                      undrawn portion of the Facility.

7.3.5. On any extension the Bank may require the Borrower to pay a further
       commitment fee.

8.         CANCELLATION

8.1.       CANCELLATION

           The Borrower may, by giving the Bank not less than 5 days' prior
           notice, cancel all or part of the Available Facility (but if in part,
           in a minimum amount of (pound)500,000 and an integral multiple of
           (pound)250,000).

8.2.       NOTICE

           Any notice of cancellation shall be irrevocable and shall specify the
           date on which the cancellation shall take effect and the amount of
           the cancellation.

8.3.       EFFECT OF CANCELLATION

           The Borrower may not borrow any part of the Facility which has been
           cancelled. Any cancellation shall reduce the Facility Limit
           accordingly.

8.4.       LIMITATION

           The Borrower may not cancel all or part of the Facility except as
           expressly provided in this Agreement.

                                      -14-

<PAGE>

9.         CHANGES IN CIRCUMSTANCES

9.1.       ILLEGALITY

           If it is or becomes illegal for the Bank to maintain the Facility or
           to continue to make available or fund any Advance, then:

           (a)        the Bank shall notify the Borrower; and

           (b)        (i)       the Facility shall be cancelled immediately and
                                the Facility Limit shall  be reduced to zero; 
                                and

                      (ii)      the Borrower shall prepay to the Bank all
                                Advances (together with accrued interest on the
                                amount prepaid and all other amounts owing to
                                the Bank under this Agreement) within 5 Business
                                Days of demand by the Bank (or, if later and if
                                permitted by the relevant law, on the last day
                                of the Interest Period of the relevant
                                Advances).

           Any such prepayment under paragraph (b)(ii) above shall be subject to
           Clause 21.1.

9.2.       INCREASED COSTS

9.2.1.     If, after the date of this Agreement, a Change occurs which causes an
           Increased Cost (as defined in Clause 9.2.3) to the Bank (or any
           company of which the Bank is a Subsidiary) then the Borrower shall
           pay (as additional interest) to the Bank within 5 Business Days of
           demand all amounts which the Bank certifies to be necessary to
           compensate the Bank (or any company of which the Bank is a
           Subsidiary) for the Increased Cost.

9.2.2.     Any demand made under Clause 9.2.1 shall set out in reasonable detail
           so far as is practicable the basis of computation of the Increased
           Cost.

9.2.3.     In this Clause 9.2:

           "INCREASED COST" means any cost to, or reduction in the amount
           payable to, or reduction in the return on capital or regulatory
           capital achieved by, the Bank (or any company of which the Bank is a
           Subsidiary) to the extent that it arises, directly or indirectly, as
           a result of the Change and is attributable to the Facility or any
           Advance or the funding or any Advance including:

           (a)        any Tax Liability (other than Tax on Overall Net Income)
                      incurred by the Bank;

           (b)        any changes in the basis or timing of Taxation of the Bank
                      in relation to the  Facility or any Advance or to the
                      funding of any Advance;

           (c)        the cost to the Bank (or any company of which the Bank is
                      a Subsidiary) of complying with, or the reduction in the
                      amount payable to or reduction in the return on capital or
                      regulatory capital achieved by the Bank (or any company of
                      which the Bank is a Subsidiary) as a result of complying
                      with, any capital adequacy or similar requirements
                      howsoever arising, including as a result of an increase in
                      the amount of capital to be allocated to the Facility or
                      of a change to the weighting of the commitment under the
                      Facility or any Advance; and

                                      -15-

<PAGE>

           (d)        the cost to the Bank of complying with any reserve, cash
                      ratio, special deposit or liquidity requirements (or any
                      other similar requirements).

           "TAX LIABILITY" means, in respect of any person:

           (a)        any liability or any increase in the liability of that 
                      person to make any payment of or in respect of Tax;

           (b)        the loss of any relief, allowance, deduction or credit in
                      respect of Tax which would otherwise have been available
                      to that person;

           (c)        the setting off against income, profits or gains or
                      against any Tax liability of any relief, allowance,
                      deduction or credit in respect of Tax which would
                      otherwise have been available to that person; and

           (d)        the loss or setting off against any Tax liability of a
                      right to repayment of Tax which would otherwise have been
                      available to that person.

           For the purposes of this definition of "Tax Liability", any question
           of whether or not any relief, allowance, deduction, credit or right
           to repayment of Tax has been lost or set off, and if so, the date on
           which that loss or set-off took place, shall be conclusively
           determined by the relevant person's auditors.

           "TAX ON OVERALL NET INCOME" means, in relation to the Bank, Tax
           (other than Tax deducted or withheld from any payment) imposed on the
           net profits of the Bank by the jurisdiction in which its Lending
           Office or its head office is situated.

9.2.4.     The Borrower shall not be obliged to make a payment in respect of an
           Increased Cost under this Clause 9.2 if and to the extent that the
           Increased Cost has been compensated for by the payment of Mandatory
           Liquid Asset Costs or the operation of Clause 10.9.

9.2.5.     If the Borrower is required to pay any amount to the Bank under this
           Clause 9.2, then, without prejudice to that obligation and so long as
           the circumstances giving rise to the relevant Increased Cost are
           continuing and subject to the Borrower giving the Bank not less than
           10 days' prior notice (which shall be irrevocable), the Borrower may
           prepay all, but not part, of the Loan together with accrued interest
           on the amount prepaid. Any such prepayment shall be subject to Clause
           21.1. On any such prepayment the Facility shall be automatically
           cancelled and the Facility Limit shall be reduced to zero.

9.3.       MARKET DISRUPTION

           If, in relation to a proposed Advance:

           (a)        the Bank determines that, because of circumstances
                      affecting the London interbank market generally,
                      reasonable and adequate means do not exist ascertaining
                      LIBOR for that Advance for the relevant Interest Period;
                      or

           (b)        the Bank is of the opinion that:

                      (i)       matching deposits may not be available to it in
                                the London interbank market in the ordinary
                                course of business to fund that Advance for the
                                relevant Interest Period; or

                                      -16-

<PAGE>

                      (ii)      the cost to it of obtaining matching deposits in
                                the London interbank market would be in excess
                                of LIBOR for the relevant Interest Period,

           the Bank shall promptly notify the Borrower of that event and that
           Advance shall not be made. Instead, the Bank and the Borrower shall
           immediately enter into negotiations for a period of not more than 30
           days with a view to agreeing a substitute basis for calculating the
           interest rate for the Advance or for funding the Advance (whether in
           Sterling or another currency). Any substitute basis agreed by the
           Bank and the Borrower shall take effect in accordance with its terms.

9.4.       MITIGATION

9.4.1.     If any circumstances arise in respect of the Bank which would, or
           upon the giving of notice would, result in the operation of Clause
           9.1., 9.2, 9.3 or 10.9 to the detriment of the Borrower, then the
           Bank shall:

           (a)        promptly upon becoming aware of those circumstances and
                      their results, notify  the Borrower; and

           (b)        in consultation with the Borrower, take all such steps as
                      it determines are reasonably open to it to mitigate the
                      effects of those circumstances (including changing its
                      Lending office or consulting with the Borrower with a view
                      to transferring some or all of its rights and obligations
                      under this Agreement to another bank or other financial
                      institution acceptable to the Borrower) in a manner which
                      will avoid the circumstances in question and on terms
                      acceptable to the Borrower and the Bank,

           provided that the Bank shall not be obliged to take any steps which
           in its opinion would or might have an adverse effect on its business
           or financial condition or the management of its Tax affairs or cause
           it to incur any material costs or expenses.

9.4.2.     Nothing in this Clause 9.4 shall limit, reduce, affect or otherwise
           qualify the rights of the Bank or the obligations of the Borrower
           under Clauses 9.1, 9.2, 9.3 and 10.9.

9.5.       CERTIFICATES

           The certificate or notification of the Bank as to any of the matters
           referred to in this Clause 9 shall be in reasonable detail and shall
           be conclusive and binding on the Borrower except for any manifest
           error.

10.        PAYMENTS

10.1.      FUNDS

           All payments under this Agreement shall be made for value on the due
           date in freely transferable and readily available funds.

10.2.      PAYMENTS

10.2.1.    Each payment to the Borrower shall be made to the account of the
           Borrower with [Nottingham branch], account number 36149837, sort code
           60 80 09.

10.2.2.    Each payment to the Bank shall be made to [Nottingham branch] for the
           account of the Bank, account number 36149837, sort code 60 80 09.

                                      -17-

<PAGE>

10.3.      CHANGE OF ACCOUNT

           The Borrower or the Bank may change its receiving account by not less
           than 5 Business  Days' notice to the other.

10.4.      BUSINESS DAYS

           If a payment under this Agreement is due on a day which is not a
           Business Day, the due date for that payment shall instead by the next
           Business Day in the same calendar month (if there is one) or the
           preceding Business Day (if there is not).

10.5.      CURRENCY

           All payments relating to costs, losses, expenses or Taxes shall be
           made in the currency in which the relative costs, losses, expenses or
           Taxes were incurred. Any other amount payable under this Agreement
           shall, except as otherwise provided, be made in Sterling.

10.6.      ACCOUNTS AS EVIDENCE

           The Bank shall maintain in accordance with its usual practice an
           account which shall as between the Borrower and the Ban, be prima
           facie evidence of the amounts from time to time advanced by, owing
           to, paid and repaid to the Bank under this Agreement.

10.7.      PARTIAL PAYMENTS

10.7.1.    If the Bank receives a payment insufficient to discharge all the
           amounts then due and payable by the Borrower under this Agreement,
           the Bank shall apply that payment towards the obligations of the
           Borrower under this Agreement in the following order:

           (a)        first, in or towards payment of any unpaid costs and 
                      expenses of the Bank under  this Agreement;

           (b)        second, in or towards payment of any accrued interest due
                      but unpaid under this Agreement;

           (c)        third, in or towards payment of any  principal due but 
                      unpaid under this  Agreement; and

           (d)        fourth, in or towards payment of any other sum due but 
                      unpaid under this Agreement.

10.7.2.    The Bank may vary the order set out in Clauses 10.7.1(b) to (d).

10.7.3.    Clauses 10.7.1 and 10.7.2 shall override any appropriation made by 
           the Borrower.

10.8.      SET-OFF AND COUNTERCLAIM

           All payments by the Borrower under this Agreement shall be made
           without set-off or counterclaim.

                                      -18-

<PAGE>

10.9.      GROSSING-UP

10.9.1.    Subject to Clause 10.9.2, all sums payable to the Bank pursuant to or
           in connection with any Financing Document shall be paid in full free
           and clear of all deductions or withholdings whatsoever except only as
           may be required by law.

10.9.2.    If any deduction or withholding is required by law in respect of any
           payment due from the Borrower to the Bank pursuant to or in
           connection with any Financing Document the Borrower shall:

           (a)        ensure or procure that the deduction or withholding is
                      made and that it does not exceed the minimum legal
                      requirement therefor;

           (b)        pay, or procure the payment of, the full amount deducted
                      or withheld to the relevant Taxation or other authority in
                      accordance with the applicable law;

           (c)        increase the payment in respect of which the deduction or
                      withholding is required so that the next amount received
                      by the Bank after the deduction or withholding (and after
                      taking account of any further deduction or withholding
                      which is required to be made as a consequence of the
                      increase) shall be equal to the amount which the Bank
                      would have been entitled to receive in the absence of any
                      requirement to make any deduction or withholding; and

           (d)        promptly deliver or procure the delivery to the Bank of
                      receipts evidencing each deduction or withholding which
                      has been made.

10.9.3.    The Borrower shall not be required to pay an additional amount under
           this Clause 10.9 if the payment in respect of which the deduction or
           withholding is required is a payment of interest on an Advance and:

           (a)        at the time that Advance was made, the Bank was not a
                      Qualifying Bank otherwise than as a consequence of a
                      Change occurring after the date of this Agreement (and the
                      obligation to deduct or withhold would not have arisen if
                      that Advance had been made by a Qualifying Bank); or

           (b)        at the time when the interest is paid, the Bank is not
                      beneficially entitled to it or, being beneficially
                      entitled to it, the Bank is not within the charge to
                      United Kingdom corporation tax as respects it otherwise
                      than as a consequence of a Change occurring after the date
                      of this Agreement (and the obligation to deduct or
                      withhold would not have arisen if the Bank had been
                      beneficially entitled to the interest and had been within
                      the charge to United Kingdom corporation tax as respects
                      it).

10.9.4.    If the Bank determines, in its absolute discretion, that it has 
           received, realised, utilised and retained a Tax benefit by reason of
           any deduction or withholding in respect of which the Borrower has 
           made an increased payment under this Clause 10.9, the Bank shall,
           provided that it has received all amounts which are then due and 
           payable by the obligors under any Financing Document, pay to the 
           Borrower (to the extent that the Bank can do so without prejudicing
           the amount of the benefit or repayment and the right of the Bank to 
           obtain any other benefit, relief or allowance which may be available
           to it) such amount, if any, as the Bank, in its absolute discretion 
           shall determine, will leave the Bank in no

                                      -19-

<PAGE>

           worse position than it would have been in if the deduction or 
           withholding had not be required, provided that:

           (a)        the Bank shall have an absolute discretion as to the time
                      at which and the order and manner in which it realises or
                      utilises any Tax benefit and shall not be obliged to
                      arrange its business or its Tax affairs in any particular
                      way in order to be eligible for any credit or refund or
                      similar benefit;

           (b)        the Bank shall not be obliged to disclose any information 
                      regarding its business, Tax affairs or Tax computations;

           (c)        If the Bank has made a payment to the Borrower pursuant to
                      this Clause 10.9.4 on account of any Tax benefit and its
                      subsequently transpires that the Bank did not receive that
                      Tax benefit, or received a lesser Tax benefit, the
                      Borrower shall, on demand, pay to the Bank such sum as the
                      Bank may determine as being necessary to restore its
                      after-tax position to that which it would have been had no
                      adjustment under this Clause 10.9.4 been made. Any sums
                      payable by the Borrower to the Bank under this Clause
                      10.9.4 shall be subject to Clause 16.6.

10.9.5.    The Bank shall not be obliged to make any payment under Clause 10.9.4
           if, by doing so, it would contravene the terms of any applicable law
           or any notice, direction nor requirement of any governmental or
           regulatory authority (whether or not having the force of law).

10.9.6.    If the Borrower is required to make an increased payment for the
           account of the Bank under Clause 10.9.2, then, without prejudice to
           that obligation and so long as such requirement exists and subject to
           the Borrower giving the Bank not less than 10 days' prior notice
           (which shall be irrevocable), the Borrower may prepay all, but not
           part, of the Loan together with accrued interest on the amount
           prepaid. Any such prepayment shall be subject to Clause 21.1. On any
           such prepayment the Facility shall be automatically cancelled and the
           Facility Limit shall be reduced to zero.

11.        SECURITY

           The obligations and liabilities of the Borrower to the Bank under
           this Agreement shall be secured by the interests and rights granted
           in favour of the Bank under the Security # documents.

12.        REPRESENTATIONS AND WARRANTIES

12.1.      REPRESENTATIONS AND WARRANTIES

           The Borrower represents and warrants to the Bank that:

           (a)        STATUS: each Material Company is a limited company duly
                      incorporated under the laws of England and Wales, and it
                      possesses the capacity to sue and be sued in its own name
                      and has the power to carry on its business and to own its
                      property and other assets;

           (b)        POWERS AND AUTHORITY: each Material Company has power to
                      execute, deliver and perform its obligations under the
                      Financing Documents to which it is a

                                      -20-

<PAGE>

                      party and to carry out the transactions contemplated by
                      those documents and all necessary corporate, shareholder
                      and other action has been or will be taken to authorise
                      the execution, delivery and performance of the same;

           (c)        BINDING OBLIGATIONS: the obligations of each Material
                      Company under the  Financing Documents to which it is a
                      party constitute its legal, valid, binding and enforceable
                      obligations;

           (d)        CONTRAVENTIONS: the execution, delivery and performance by
                      each Material Company of the Financing Documents to which
                      it is a party does not:

                      (i)       contravene any applicable law or regulation or
                                any order of any governmental or other official
                                authority, body or agency or any judgment, order
                                or decree of any court having jurisdiction over
                                it;

                      (ii)      conflict with, or result in any breach of any of
                                the terms of, or constitute a default under, any
                                agreement or other instrument to which it is a
                                party or any license or other authorisation to
                                which it is subject or by which it or any of its
                                property is bound; or

                      (iii)     contravene or conflict with the provisions of 
                                its memorandum and  articles of association;

           (e)        INSOLVENCY: no Group Company has taken any action nor have
                      any steps been taken or legal proceedings been started or
                      threatened against it for winding-up, dissolution or
                      re-organisation, the enforcement of any Encumbrance over
                      its assets or for the appointment of a receiver,
                      administrative receiver, or administrator, trustee or
                      similar officer of it or of any of its assets;

           (f)        NO DEFAULT: no Group Company is (nor would be with any of
                      the giving of notice, the lapse of time, the determination
                      of materiality, or the satisfaction of any other
                      condition) in breach of or in default under any agreement
                      to which it is a party or which is binding on it or any of
                      its assets;

           (g)        LITIGATION: no action, litigation, arbitration or
                      administrative proceeding has been commenced, or to the
                      best of the Borrower's knowledge, information or belief is
                      pending or threatened, against any Group Company which, if
                      decided adversely, could reasonably be expected to have a
                      Material Adverse Effect and nor is there subsisting any
                      unsatisfied judgment or award given against any of them by
                      any court, arbitrator or other body;

           (h)        ACCOUNTS:

                      (i)       each of the latest Accounts required to be
                                delivered under Clause 13.1(a) is prepared in
                                accordance with GAAP and gives a true and fair
                                view of the financial position of the Group as
                                at the date to which they were prepared and for
                                the period then ended; and

                      (ii)      each of the latest set of management accounts
                                required to be delivered under Clause 13.1(c)
                                shows with reasonable accuracy the financial
                                condition of the Borrower during the period to
                                which it relates;

           (i)        ENCUMBRANCES: no Encumbrance other than a Permitted 
                      Encumbrance exists  over all or any part of the assets of
                      any Material Company;

                                      -21-

<PAGE>

           (j)        NO ENCUMBRANCES CREATED: the execution of the Financing
                      Documents by the Material Companies and the exercise of
                      each of their respective rights and the performance of
                      each of their respective obligations under the Financing
                      Documents will not result in the creation of, or any
                      obligation to create, any Encumbrance over or in respect
                      of any of their assets;

           (k)        AUTHORISATIONS: all authorisations, approvals, licenses, 
                      consents, filings, registrations, payment of duties or
                      taxes and notarisations required:

                      (i)       for the conduct of the business, trade and
                                ordinary activities of each Material Company;

                      (ii)      for the performance and discharge of its 
                                obligations under the  Financing Documents to
                                which it is a party; and

                      (iii)     in connection with the execution, delivery,
                                validity, enforceability or admissibility in
                                evidence of the Financing Documents.

                      are in full force and effect;

           (l)        TAXES: each Group Company has complied in all material
                      respects with all Taxation laws in all jurisdictions in
                      which it is subject to Taxation and has paid all Taxes due
                      and payable by it and no claims are being asserted against
                      it in respect of Taxes except for assessments in relation
                      to the ordinary course of its business or claims contested
                      in good faith and in respect of which adequate provision
                      has been made and disclosed in the latest Accounts or
                      information delivered to the Bank under this Agreement;

           (m)        NO MATERIAL ADVERSE CHANGE:   since 5th February 1998 no
                      event has occurred which has had or could be reasonably
                      expected to have a Material Adverse Effect;

           (n)        ENVIRONMENTAL: each Group Company has and has at all times
                      complied with  all applicable Environmental Law 
                      non-compliance with which could reasonably be expected to
                      have a Material Adverse Effect, every consent, 
                      authorisation, license or approval required under or 
                      pursuant to any Environmental Law by each Group Company in
                      connection with the conduct of its business and the
                      ownership, use, exploitation or occupation of its assets,
                      the absence of which could reasonably be expected to have
                      a Material Adverse Effect, has been  obtained and is in
                      full force and effect, there has been no default in the
                      observance of the conditions and restrictions (if any) 
                      imposed in, or in connection with, any of the same, which
                      default could reasonably be expected to have a Material
                      Adverse Effect and no circumstances have arisen (i) which
                      would entitle any person to revoke, suspend, amend, vary,
                      withdraw or refuse to amend any of the same or (ii) which
                      might give rise to a claim against any Group Company which
                      could reasonably be expected to have a Material Adverse
                      Effect having regard to the cost to that Group Company of
                      meeting such a claim; and

           (o)        INFORMATION PACKAGE:

                      (i)       the factual information contained in the
                                Operating Plan was, at the date of the Operating
                                Plan, true and accurate in all respects and not
                                misleading in any respect, there are no other
                                facts the omission of 

                                      -22-

<PAGE>

                                which would make any fact
                                or statement in the Operating Plan misleading in
                                any respect and nothing has occurred which would
                                render any fact or statement in the Operating
                                Plan untrue or misleading in any respect; and

                      (ii)      all estimates, forecasts and projections
                                contained or referred to in the Operating Plan,
                                and all assumptions and presumptions upon the
                                basis of which the same were made, were fair and
                                reasonable at the time they were made, and
                                nothing has occurred since the date the same
                                were made which would necessitate a revision to
                                any of those estimates, forecasts or projections
                                in order for them to be fair and reasonable.

12.2.      REPETITION

           The representations and warranties in Clause 12.1 shall survive the
           execution of this Agreement and (other than those set out in Clauses
           12.1(e), (g), (i), (j), (k), (m) and (o) shall be deemed to be
           repeated by the Borrower on the date on which each Drawdown Notice is
           given and on the first day of each Interest Period for each Advance
           as if made with reference to the facts and circumstances existing at
           that time.

13.        UNDERTAKINGS

13.1.      INFORMATION UNDERTAKINGS

           The Borrower undertakes that during the Facility Period it shall,
           unless the Bank otherwise agrees:

           (a)        ACCOUNTS: as soon as the same become available (and in any
                      event within 120 days after the end of each of its
                      Financial Years), deliver to the Bank the Accounts for
                      each such Financial Year together with the audited
                      accounts of each Material Company with a copy of the
                      relevant management letter (if any) addressed by the
                      Auditors to the directors of the Borrower;

           (b)        MANAGEMENT ACCOUNTS: as soon as the same become available
                      (and in any event within 21 days after the end of each
                      successive accounting period (none of which shall be more
                      than 5 weeks in duration) (each an "ACCOUNTING PERIOD")
                      during each of its Financial Years), deliver to the Bank
                      consolidated management accounts (the "MANAGEMENT
                      ACCOUNTS") of the Borrower for each such Accounting Period
                      in form and substance satisfactory to the Bank and which
                      shall include the following information in respect of each
                      such Accounting Period:

                      (i)       a statement of profit and loss;

                      (ii)      a balance sheet;

                      (iii)     a cashflow statement; and

                      (iv)      an analysis of the best selling 40 current
                                products in the Borrower's range,

                      together with a comparison, where appropriate, of all such
                      information with the estimates, forecasts and projections
                      in the relevant Operating Budget or any

                                      -23-

<PAGE>

                      replacement or substitution made therefor) in relation to
                      each such Accounting Period including an analysis
                      justifying any variations therefrom and, if necessary,
                      revised estimates, forecasts and projections;

           (c)        OPERATING BUDGETS:

                      (i)       provide to the Bank (in a format acceptable to
                                the Bank) an Operating Budget for each of its
                                Financial Years during the Facility Period, not
                                less than 30 days prior to the start of each
                                such Financial Year; and

                      (ii)      if any Group Company shall determine that any of
                                the estimates, forecasts or projections made in
                                relating to any of its Financial Years should be
                                different from those set out in the then current
                                Operating Budget (or any substitution therefor
                                subsequently made and agreed by the Bank),
                                provide to the Bank revised estimates, forecasts
                                or projections in respect of any part of each
                                such Financial Year and such revised estimates,
                                forecasts or projections shall apply immediately
                                following their approval by the board of
                                directors of the relevant company and the
                                Borrower,

           (d)        SHAREHOLDERS' DOCUMENTS: deliver to the Bank copies of all
                      documents despatched by it to its shareholders or its
                      creditors at the same time as they are despatched;

           (e)        COMPLIANCE CERTIFICATES: deliver to the Bank:

                      (i)       together with the Accounts and Management 
                                Accounts specified in Clauses 13.1(a) and
                                (b); and

                      (ii)      promptly at any other time, if the Bank so 
                                requests,

                      a certificate signed by two of its senior officers on its
                      behalf certifying that no Default is outstanding or, if a
                      Default is outstanding, specifying the Default and the
                      steps, if any, being taken to remedy it;

           (f)        AUDITORS CONFIRMATION: if the Bank disagrees with any such
                      calculations relevant to the financial undertakings
                      contained in Clause 13.4.1 made for the purposes of Clause
                      14.1(e) the Bank shall notify the Borrower and promptly
                      thereafter the Borrower shall procure that the Auditors
                      shall promptly review such calculations and notify the
                      Bank as soon as practicable as to whether such
                      calculations are made correctly and in accordance wit the
                      terms of this Agreement and if not made correctly,
                      promptly provide the Bank with the correct calculations
                      thereof made in accordance with the terms of this
                      Agreement;

           (g)        OTHER INFORMATION: supply to the Bank such information,
                      documents and records about the business, financial
                      condition, operations and prospects of any Group Company
                      as the Bank may from time to time reasonably require;

           (h)        GAAP: ensure that all Accounts and other financial
                      information submitted to  the Bank have been prepared in
                      accordance with GAAP;

           (i)        DEFAULT, LITIGATION, ETC: promptly, upon becoming aware of
                      the same, notify the Bank of:

                                      -24-

<PAGE>

                      (i)       the occurrence of a Default or Potential 
                                Default;

                      (ii)      any litigation, arbitration or administrative
                                proceeding commenced against any Group Company
                                involving a potential liability of any Group
                                Company in excess of (pound)50,000;

                      (iii)     any Encumbrance (other than a Permitted 
                                Encumbrance) attaching to  any of the assets
                                of any Group Company; and

                      (iv)      any occurrence (including any third party claim
                                or liability) which could reasonably be expected
                                to have a Material Adverse Effect; and

           (j)        MANAGEMENT: notify the Bank if any of Laurence Gilbert and
                      Bernadette Spofforth ceases to be an officer or employee
                      of the Borrower.

13.2.      POSITIVE UNDERTAKINGS

           The Borrower undertakes that during the Facility Period it shall, and
           it shall procure that each Group Company shall, unless the Bank
           otherwise agrees:

           (a)        PAY TAXES: pay and discharge all Taxes and governmental
                      charges payable by or assessed upon it prior to the date
                      on which the same become overdue unless, and only to the
                      extend that, such Taxes and charges shall be contested in
                      good faith by appropriate proceedings, pending
                      determination of which payment may lawfully be withheld,
                      and there shall be set aside adequate reserves with
                      respect to any such Taxes or charges so contested in
                      accordance with GAAP;

           (b)        INSURANCE: maintain insurance cover in relation to its
                      business and assets of a  type and in an amount as is
                      usual for prudent companies carrying on a business such as
                      that carried on by it;

           (c)        AUTHORISATIONS: obtain, maintain and comply with the terms
                      of any authorisation, approval, license, consent,
                      exemption, clearance, filing or registration required:

                      (i)       for the conduct of its business, trade and 
                                ordinary activities; and

                      (ii)      to enable it to perform its obligations under,
                                or for the validity, enforceability or
                                admissibility in evidence of, any Financing
                                Document;

           (d)        ACCESS: permit the Bank and any person (being an
                      accountant, auditor, solicitor, valuer or other
                      professional adviser of the Bank) authorised by the Bank
                      to have, at all reasonable times during normal business
                      hours and on reasonable notice, access to the property,
                      premises and accounting books and records of any Group
                      Company and to the officers of any Group Company;

           (e)        RANKING OF OBLIGATIONS: ensure that its obligations under
                      the Financing Documents to which it is a party shall at
                      all times rank at least pari passu with all its other
                      present and future unsecured and unsubordinated
                      Indebtedness except for any obligations which are
                      mandatorily preferred by law and not by contract;

                                      -25-

<PAGE>

           (f)        FURTHER DOCUMENTS: at the request of the Bank, do or
                      procure the doing of all such things and execute or
                      procure the execution of all such documents as are, in the
                      opinion of the Bank, necessary or desirable to ensure that
                      the Bank obtains all its rights and benefits under the
                      Financing Documents and in particular but without
                      limitation will procure that any Company which becomes a
                      Material Company will execute a Mortgage Debenture and
                      Composite Guarantee in favour of the Bank;

           (g)        COMPLIANCE WITH ENVIRONMENTAL LAW: comply in all respects
                      with  Environmental Law.

           (h)        DANGEROUS MATERIALS: ensure that all Dangerous Materials
                      treated, kept and  stored, produced, manufactured,
                      generated, refined or used from, in, upon, or under any of
                      the real property owned by that Group Company are held and
                      kept upon such real property in such a manner and up to
                      such standards as they would be kept by a prudent company
                      carrying on the same trade as that Group Company;

           (i)        SALES OF ELIGIBLE INVENTORY: ensure that all sales of 
                      Eligible Inventory on credit terms comply with the terms
                      and conditions of the Invoice Discounting  Agreement;

           (l)        EXCHANGE RATE HEDGING: make all such arrangements that a 
                      prudent company carrying on the same trade as that Group
                      Company would make in relation to the hedging of its 
                      exchange rate liabilities; and

           (k)        MILLENIUM RISK: take all such steps as a prudent company
                      carrying on the same trade as that Group Company would
                      take in relation to all computer software owned or used by
                      that Group Company in connection with defects arising as a
                      result of the date 1st January 2000 and thereafter.

13.3.      NEGATIVE UNDERTAKINGS

           The Borrower undertakes that during the Facility Period it shall not,
           and it shall procure that none of the Group Companies shall, unless
           the Bank otherwise agrees:

           (a)        NEGATIVE PLEDGE: create or permit to subsist any 
                      Encumbrance over any of its  assets other than Permitted 
                      Encumbrances.

           (b)        DISPOSAL OF ASSETS: make a Disposal other than:

                      (i)       in the ordinary course of its trading 
                                activities; or

                      (ii)      whether the proceeds of the Disposal are used
                                immediately to purchase an asset to replace
                                directly the asset the subject of that Disposal;
                                or

                      (iii)     a Disposal on arm's length terms where the
                                aggregate value of the assets the subject of a
                                Disposal by Group Companies other than in
                                accordance with paragraphs (i) and (ii) above in
                                any Financial Year of the Borrower does not
                                exceed (pound)1,000,000 (for the purposes of
                                this paragraph, the value of any asset shall be
                                the greater of its book value and the
                                consideration received for it);

                                      -26-

<PAGE>

           (c)        CHANGE OF BUSINESS: make any substantial change to the
                      general nature or scope of the business of the Borrower or
                      the Group as a whole from that carried on at the date of
                      this Agreement;

           (d)        MERGERS: enter into any amalgamation, demerger, merger or
                      reconstruction or  any joint venture or partnership
                      agreement;

           (e)        LOANS: make an loans or grant any credit to or for the
                      benefit of any person,  other than amounts of credit
                      allowed in the ordinary course of its trading activities;

           (f)        INDEBTEDNESS: incur any Indebtedness other than Permitted
                      Indebtedness;

           (g)        ACQUISITIONS: acquire any business of, or shares or
                      securities of, any company other than where the aggregate
                      of the consideration payable for, and Indebtedness assumed
                      by Group Companies in connection with, acquisitions made
                      by Group Companies in any Financial Year of the Borrower
                      does not exceed (pound)1,000,00.#

13.4.      FINANCIAL UNDERTAKINGS

13.4.1.    The Borrower undertakes to ensure that during the Facility Period, 
           unless the Bank  otherwise agrees:

           (a)        PBIT TO TOTAL DEBT COSTS

                      The ratio of PBIT to Total Debt Costs for the period of 12
                      months ending on the last day of each month during the
                      Facility Period shall not be less than 3:1.

           (b)        TOTAL LEVERAGE RATIO

                      The ratio of Total Debt to PBITDA at any time during the
                      period of 12 months ending on the last day of each month
                      during the Facility Period shall not be greater than
                      2.5:1;

           (c)        MINIMUM TANGIBLE NET WORTH

                      Tangible Net Worth shall not on the date referred to in
                      Column A below be less than the amount set opposite that
                      date in Column B below.

<TABLE>
<CAPTION>
                      COLUMN A       COLUMN B DATE                      AMOUNT

<S>                   <C>            <C>                             <C>
                      30th June 1997 (pound)1,500,000 30th June 1998 (pound)2,500,000
</TABLE>

           (d)        NET INDEBTEDNESS COVER

                      The ratio of the aggregate value of Free Stock and
                      Eligible Debtors to Net Indebtedness shall not at any time
                      be less that 1.5:1.

13.4.2.    The calculation of ratios and other amounts under this Clause 13.4
           shall be made by the Bank by reference to latest Accounts and
           management accounts and other financial information of the Group for
           the period in relation to which the calculation falls to be made.
           Each determination of the Bank under this Clause 13.4 shall be
           conclusive and binding on the Borrower except for any manifest error.

                                      -27-

<PAGE>

14.        DEFAULT

14.1.      DEFAULT

           Each of the following shall be a Default:

           (a)        NON-PAYMENT: the Borrower does not pay on the due date any
                      amount payable by it under this Agreement at the place at
                      and in the currency and funds in which it is expressed to
                      be payable unless in relation to the payment of interest
                      only the failure to pay such amount is due solely to
                      administrative or technical delays in the transmission of
                      funds which are not the fault of the Borrower and such
                      amount is paid within 3 Business Days after its due date
                      for payment; or

           (b)        OTHER DEFAULTS: any Material Company breaches any of its
                      obligations under any Financing Document (other than the
                      obligations referred to in Clause 14.1(a) but including a
                      breach of any of the undertakings pursuant to Clause 13.1)
                      and, if that breach is capable of remedy, it is not
                      remedied within 5 Business Days after notice of that
                      breach has been given by the Bank to the Borrower; or

           (c)        BREACH OF REPRESENTATION OR WARRANTY: any representation,
                      warranty or statement made or deemed to be repeated by any
                      Material Company under any Financing Document or in any
                      document delivered by or on behalf of the Borrower under
                      or in connection with any Financing Document is incorrect
                      when made or deemed to have been repeated; or

           (d)        UNLAWFULNESS OR REPUDIATION: it is unlawful for any 
                      Material Company to perform or comply with, or any 
                      Material Company repudiates, any of its obligations under
                      any Financing Document; or

           (e)        CROSS-DEFAULT: any Indebtedness of all or any Group 
                      Companies in excess of, in aggregate, (pound)10,000;

                      (i)       is not paid when due; or

                      (ii)      is declared to be or otherwise becomes due and
                                payable prior to its specified maturity,

                      or any creditor of all or any Group Companies becomes
                      entitled to declare any  such Indebtedness due and payable
                      prior to its specified maturity; or

           (f)        ATTACHMENT OR DISTRESS: a creditor or encumbrancer
                      attaches or takes possession of, or a distress, execution,
                      sequestration or other process is levied or enforced upon
                      or sued out against, any of the assets of any Group
                      Company and such process is not discharged within 14 days;
                      or

           (g)        ENFORCEMENT OF SECURITY: any Encumbrance over any of the
                      assets of any  Group Company becomes enforceable; or

           (h)        INABILITY TO PAY DEBTS: any Group Company:

                      (i)       suspends payment of its debts or is unable or
                                admits its inability to  pay its debts
                                as they fall due; or

                                      -28-

<PAGE>

                      (ii)      begins negotiations with any creditor with a 
                                view to the readjustment  or rescheduling
                                of any of its Indebtedness; or

                      (iii)     proposes or enters into any composition or other
                                arrangement for the benefit of its creditors
                                generally or any class of creditors, or

           (i)        INSOLVENCY PROCEEDINGS: any person takes any action or any
                      legal proceedings are started or other steps taken
                      (including the presentation of a petition) for:

                      (i)       any Group Company to be adjudicated or found
                                insolvent; or

                      (ii)      the winding-up or dissolution of any Group
                                Company other than in connection with a solvent
                                reconstruction, the terms of which have been
                                previously approved in writing by the Bank; or,

                      (iii)     the appointment of a trustee, receiver, 
                                administrative receiver or similar officer in
                                respect of any Group Company or any of its 
                                assets; or

           (j)        ADJUDICATION OR APPOINTMENT: any adjudication, order or
                      appointment is made under or in relation to any of the
                      proceedings referred to in Clause 14.1(I); or

           (k)        ADMINISTRATION ORDER: an application is made to the court
                      for an administration order under the Insolvency Act 1986
                      with respect to any Group Company; or

           (l)        ANALOGOUS PROCEEDINGS: any event occurs or proceeding is
                      taken with respect to any Group Company in any
                      jurisdiction to which it is subject which has an effect
                      equivalent or similar to any of the events mentioned in
                      Clause 14.1(f), (h), (i), (j) or (k); or

           (m)        CESSATION OF BUSINESS: any Group Company suspends, ceases
                      or threatens to suspend or cease to carry on all or a
                      substantial part of its business; or

           (n)        CHANGE OF CONTROL: a person (whether alone or together
                      with any associated person or persons) becomes the
                      beneficial owner of shares in the issued share capital of
                      the Borrower carrying the right to exercise more than 50
                      per cent of the votes exercisable at a general meeting of
                      the Borrower (for the purposes of this Clause 14.1(n),
                      "ASSOCIATED PERSON" means, in relation to any person, a
                      person who is (i) "acting in concert" (as defined in the
                      City Code on Takeovers and Mergers) with that person or
                      (ii) a "connected person" (as defined in section 839 of
                      the Income and Corporation Taxes Act 1988) of that
                      person); or

           (o)        MATERIAL ADVERSE CHANGE: any event or series of events 
                      occur which, in the opinion of the Bank, has or could
                      reasonably be expected to have a Material Adverse Effect;
                      or

           (p)        INVOICE DISCOUNTING AGREEMENT: the Invoice Discounting
                      Agreement is terminated for any reason (other than on
                      terms which have previously been approved in writing by
                      the Bank) or any material variation or amendment is made
                      to the Invoice Discounting Agreement (other than with the
                      Bank's prior written consent).

                                      -29-

<PAGE>

14.2.      ACCELERATION

           If a Default occurs and remains unremedied the Bank may be notice to
           the Borrower:

           (a)        cancel the Facility and require the Borrower immediately
                      to repay the Loan together with accrued interest and all
                      other sums payable under this Agreement, whereupon they
                      shall become immediately due and payable; or

           (b)        place the Facility on demand, whereupon the Loan together
                      with accrued interest and all other sums payable under
                      this Agreement shall become repayable on demand made by
                      the Bank.

           Upon the service of any such notice by the Bank the Bank's
           obligations under this Agreement shall be terminated, the Facility
           shall be cancelled and the Facility Limit shall be reduced to zero.

15.        SET-OFF

           The Bank may set off any matured obligation owed by the Borrower
           under any Financing Document against any obligation (whether or not
           matured) owed by the Bank to the Borrower, regardless of the place of
           payment, booking branch or currency of either obligation. If the
           obligations are in different currencies, the Bank may convert either
           obligation at the spot rate of exchange of the Bank for the purpose
           of the set-off.

16.        FEES AND EXPENSES

16.1.      EXPENSES

           The Borrower shall on demand pay all expenses incurred (including
           legal, valuation and accounting fees), and any VAT on those expenses:

           (a)        by the Bank in connection with the negotiation,
                      preparation and execution of the Financing Documents and
                      the other documents contemplated by the Financing
                      Documents;

           (b)        by the Bank in connection with the granting of any
                      release, waiver or consent or in connection with any
                      amendment or variation of any Financing Document; and

           (c)        by the Bank in enforcing, perfecting, protecting or
                      preserving (or attempting so to do) any of their rights,
                      or in suing for or recovering any sum due from the
                      Borrower or any other person under any Financing Document,
                      or in investigating any possible Default or Potential
                      Default.

16.2.      DRAWDOWN FEE

           The Borrower shall pay to the Bank a drawdown fee at the rate of 0.5
           per cent of each Advance, such fee to be payable on the making of the
           relevant Advance.

                                      -30-

<PAGE>


16.3.      COMMITMENT FEE

           The Borrower shall pay a commitment fee in Sterling to the Bank of
           (pound)40,000 on the date of this Agreement.

16.4.      DOCUMENTARY TAXES indemnity

           All stamp, documentary, registration or other like duties or Taxes,
           including any penalties, additions, fines, surcharges or interest
           relating to those duties and Taxes, which are imposed or chargeable
           on or in connection with any Financing Document shall be paid by the
           Borrower. The Bank shall be entitled but not obliged to pay any such
           duties or Taxes (whether or not they are its primary responsibility).
           If the Bank does so the Borrower shall on demand indemnify the Bank
           against those duties and Taxes and against any costs and expenses
           incurred by the Bank in discharging them.

16.5.      VAT

16.5.1.    All payments made by the Borrower under the Financing Documents are
           calculated without regard to VAT. If any such payment constitutes the
           whole or any part of the consideration for a taxable or deemed
           taxable supply (whether that supply is taxable pursuant to the
           exercise of an option or otherwise) by the Bank, the amount of that
           payment shall be increased by an amount equal to the amount of VAT
           which is chargeable in respect of the taxable supply in question.

16.5.2.    No payment or other consideration to be made or furnished to the
           Borrower by the Bank pursuant to or in connection with any Financing
           Document or any transaction or document contemplated in any Financing
           Document may be increased or added to by reference to (or as a result
           of any increase in the rate of) any VAT which shall be or may become
           chargeable in respect of any taxable supply.

16.6.      INDEMNITY PAYMENTS

           Where in any Financing Document the Borrower has an obligation to
           indemnify or reimburse the Bank in respect of any loss or payment,
           the calculation of the amount payable by way of indemnity or
           reimbursement shall take account of the likely Tax treatment in the
           hands of the Bank (as determined by the Bank's auditors) of the
           amount payable by way of indemnity or reimbursement and of the loss
           or payment in respect of which that amount is payable.

17.        WAIVERS; REMEDIES CUMULATIVE

           The rights of the Bank under the Financing Documents:

           (a)        may be exercised as often as necessary;

           (b)        are cumulative and not exclusive of its rights under
                      the general law; and

           (c)        may be waived only in writing and specifically.

           Delay in exercising or non-exercise of any such right is not a waiver
           of that right.

                                      -31-

<PAGE>

18.        MISCELLANEOUS

18.1.      SEVERANCE

           If any provision of this Agreement is or becomes illegal, invalid or
           unenforceable in any jurisdiction, that shall not affect:

           (a)        the legality, validity or enforceability in that 
                      jurisdiction of any other provision of this
                      Agreement; or

           (b)        the legality, validity or enforceability in any other
                      jurisdiction of that or any other provision of this
                      Agreement.

18.2.      COUNTERPARTS

           This Agreement may be executed in any number of counterparts and this
           shall have the same effect as if the signatures on the counterparts
           were on a single copy of this Agreement.

18.3.      ENTIRE AGREEMENT

           This Agreement in conjunction with the Security # documents
           constitutes the entire agreement between the Parties in relation to
           the Facility and supersedes all previous proposals, agreements and
           other written and oral communications in relation to the Facility.

19.        NOTICES

19.1.      METHOD

           Each notice or other communication to be given under this Agreement
           shall be given in writing in English and, unless otherwise provided,
           shall be made by fax or letter.

19.2.      DELIVERY

           Any notice or other communication to be given by one Party to another
           under this Agreement shall (unless one P arty has by 15 days' notice
           to the other Party specified another address) be given to that other
           Party at the respective addresses given in Clause 19.3.

19.3.      ADDRESSES

           The address and fax number of the Borrower and Bank are:

           (A)        the Borrower:

                      20-24 Church Street
                      Altrincham
                      Cheshire WA14 4DW
                      Attention:    *
                      Fax:     0161 955 1001

                                      -32-

<PAGE>

           (B)        the Bank:

                      NatWest UK
                      Corporate Banking Services
                      1st Floor, Radford House
                      Radford Boulevard
                      Nottingham NG7 5QG
                      Attention:    P. Bloxham
                      Fax:     0115 942 204

19.4.      DEEMED RECEIPT

19.4.1.    Any notice or other communication given by the Bank shall be deemed
           to have been received:

           (a)        if sent by fax, with a confirmed receipt of transmission
                      from the receiving  machine, on the day
                      on which transmitted;

           (b)        in the case of a notice given by hand, on the day of 
                      actual delivery; and

           (c)        if posted, on the second Business Day following the day on
                      which it was despatched by first class mail postage
                      prepaid.

           provided that a notice given in accordance with the above but
           received on a day which is not a Business Day or after normal
           business hours in the place of receipt shall be deemed to have been
           received on the next Business Day.

19.4.2.    Any notice or other communication given to the Bank shall be deemed
           to have been given only on actual receipt.

20.        ASSIGNMENTS AND TRANSFERS

20.1.      BENEFIT OF AGREEMENT

           This Agreement shall be binding upon and enure to the benefit of each
           Party and its successors and assigns.

20.2.      ASSIGNMENTS AND TRANSFERS BY BORROWER

           The Borrower shall not be entitled to assign or transfer any of its
           rights or obligations under this Agreement.

20.3.      ASSIGNMENTS BY BANK

           The Bank may (with the prior consent of the Borrower) assign any of
           its rights and benefits under any Financing Document to another bank
           or other financial institution.

20.4.      TRANSFERS BY BANK

           The Bank may with the prior consent of the Borrower) transfer any of
           its rights and obligations under any Financing Document to another
           bank or other financial institution.

           The Borrower shall enter into such documents as the Bank may
           reasonably stipulate in order to effect any such transfer.

                                      -33-

<PAGE>


20.5.      CONSEQUENCES OF TRANSFER

           The Borrower shall be under no obligation to pay any greater amount
           under this Agreement following an assignment or transfer by the Bank
           of any of its rights or obligations pursuant to this Clause 20 if, in
           the circumstances existing at the time of such assignment or
           transfer, such greater amount would not have been payable but for the
           assignment or transfer.

20.6.      DISCLOSURE OF INFORMATION

           The Bank may disclose to its professional advisers and to any actual
           or potential assignee, transferee or sub-participant any information
           which the Bank has acquired under or in connection with any Financing
           Document.

21.        INDEMNITIES

21.1.      BREAKAGE costs indemnity

           The Borrower shall indemnify the Bank on demand against any loss or
           expense (including any loss of Margin or any other loss or expense on
           account of funds borrowed, contracted for or utilised to fund any
           amount payable under this Agreement, any amount repaid or prepaid
           under this Agreement or any Advance) which the Bank has sustained or
           incurred as a consequence of:

           (a)        an Advance not being made following the service of a
                      Drawdown Notice (except as a result of the failure of the
                      Bank to comply with its obligations under this Agreement);

           (b)        the failure of the Borrower to make payment on the due
                      date of any sum due  under this Agreement;

           (c)        the occurrence of any Default or the operation of 
                      Clause 14.2; or

           (d)        any repayment or prepayment of an Advance otherwise than
                      on the last day of the Interest Period in relation to that
                      Advance.

21.2.      CURRENCY INDEMNITY

21.2.1.    Any payment made to or for the account of or received by the Bank in
           respect of any moneys or liabilities due, arising or incurred by the
           Borrower to the Bank in a currency (the "CURRENCY OF PAYMENT") other
           than the currency in which the payment should have been made under
           this Agreement (the "CURRENCY OF OBLIGATION") in whatever 
           circumstances (including a result of a judgment against the Borrower)
           and for whatever reason shall constitute a discharge to the Borrower
           only to the extent of the Currency of Obligation amount which the
           Bank is able on the date of receipt of such payment (or if such date
           of receipt is not a Business Day, on the next succeeding Business
           Day) to purchase with the Currency of Payment amount at its spot 
           rate of exchange (as conclusively determined by the Bank) in the
           London foreign exchange market.

21.2.2.    If the amount of the Currency of Obligation which the Bank is so able
           to purchase falls short of the amount originally due to the Bank
           under this Agreement, then the Borrower shall immediately on demand
           indemnify the Bank against any loss or damage arising as a

                                      -34-

<PAGE>

           result of that shortfall by paying to the Bank that amount in the
           Currency of Obligation certified by the Bank as necessary so to
           indemnify it.

21.3.      GENERAL

21.3.1.    Each indemnity in this Clause 21 shall constitute a separate and
           independent obligation from the other obligations contained in this
           Agreement, shall give rise to a separate and independent cause of
           action, shall apply irrespective of any indulgence granted from time
           to time and shall continue in full force and effect notwithstanding
           any judgment or order for a liquidated sum or sums in respect of
           amounts due under this Agreement or under any such judgment or order.

21.3.2.    The certificate of the Bank as to the amount of any loss or damage
           sustained or incurred by it shall be conclusive and binding on the
           Borrower except for any manifest error.

22.        LAW

           This Agreement is governed by and shall be construed in accordance
           with English law.

IN WITNESS whereof the Parties have caused this Agreement to be duly executed on
the date set out above.

                                      -35-

<PAGE>


                                   SCHEDULE 1

                              CONDITIONS PRECEDENT

The Bank shall have received each of the following in form and substance
satisfactory to it:

1.         A Certified Copy of the certificate of incorporation (and any
           relevant certificate of incorporation on change of name) and the
           memorandum and articles of association of each Material Company.

2.         A Certified Copy of the board minutes and resolutions of the Borrower
           approving and authorising the execution, delivery and performance of
           each Financing Document to which the Borrower is a party on the terms
           and conditions of those documents and authorising a person or persons
           to sign or otherwise attest the due execution of those documents and
           any other documents to be executed or delivered by the Borrower
           pursuant to those documents together with a certificate of a duly
           authorised officer of the Borrower setting out the names and
           signatures of the persons authorised to sign such documents on behalf
           of the Borrower.

3.         Certificate signed by a director of the Borrower confirming that all
           consents, licences, approvals or authorisations of any governmental
           or other authority, bureau or agency required by each Material
           Company in connection with the execution, delivery, performance,
           validity or enforceability of the Financing Documents or any document
           to be delivered under the Financing Documents are in place.


                                      -36-

<PAGE>

                                   SCHEDULE 2

                                 DRAWDOWN NOTICE

To:        National Westminster Bank Plc

From:      European Micro plc

                                                                    *[date] 1998

Dear Sirs,

(POUND)3,500,000 CREDIT AGREEMENT DATED * MAY 1998 (THE "CREDIT AGREEMENT")

Terms defined in the Credit Agreement have the same meaning in this notice.

We request [an] Advance[s] to be drawn down under the Credit Agreement as
follows:

1.         Amount of Advance[s]:(pound)*                          [(pound)*]

2.         Drawdown Date:

3.         Duration of Interest Period[s]:  *[day[s]/month]

4.         Payment instructions:  * (if applicable)

We attach a copy of the delivery note[s] dated * [and * ] from * [and *].

We confirm that:

(a) the Eligible Inventory referred to in [each of] the attached delivery 
    note[s] is marked *;

(b) * per cent of the Eligible Inventory [in the delivery note marked*] is Pre
    Sold; and

(c) the Eligible Inventory referred to in [each of] the attached delivery
    note[s] will be sold, transferred or otherwise disposed of to the
    extent that is required to repay in full the relevant advance on or
    before the expiry of the [relevant] Interest Period.

We further confirm that today and on the Drawdown Date:

(a) the representations and warranties in Clause 12 to be repeated are and
    will be correct; and

(b) no Default or Potential Default has occurred and is continuing or will occur
    on the making of the Advance.

                                      -37-

<PAGE>


SIGNED

FOR AND ON BEHALF OF EUROPEAN MICRO PLC


                                      -38-

<PAGE>

                                   SCHEDULE 3

                                     PART 1

                                 GROUP COMPANIES
<TABLE>
<CAPTION>

COLUMN 1                             COLUMN 2                            COLUMN 3

NAME                                 JURISDICTION OF INCORPORATION AND   SECURITY DOCUMENTS
                                     REGISTERED NUMBER

<S>                                  <C>                                 <C>
European Micro plc                   England & Wales (registered         Mortgage Debenture dated 12th
                                     number 2663964)                     November 1996

European Micro GmbH                  Germany (registered number          None
                                     HRB305196)

European Micro BV                    Netherlands (registered number      None
                                     2663964)


                                     PART 2

                               MATERIAL COMPANIES

COLUMN 1                             COLUMN 2                            COLUMN 3

NAME                                 JURISDICTION OF INCORPORATION AND   SECURITY DOCUMENTS
                                     REGISTERED NUMBER

European Micro plc                   England & Wales (registered         Mortgage Debenture dated 12th
                                     number 2663964)                     November 1996

</TABLE>

                                      -39-

<PAGE>

                                   SCHEDULE 4

                           MANDATORY COST RATE FORMULA

1.         The Mandatory Cost Rate is an addition to the interest rate on an
           Advance to compensate the Bank for the cost attributable to an
           Advance resulting from the imposition from time to time under or
           pursuant to the Bank of England Act 1998 (the "ACT") and/or by the
           Bank of England and/or the Financial Services Authority (the "FSA")
           (or other United Kingdom governmental authorities or agencies) of a
           requirement to place non-interest-bearing cash ratio deposits or
           Special Deposits (whether interest bearing or not) with the Bank of
           England and/or pay fees to the FSA calculated by reference to
           liabilities used to fund the Advance.

2.         The Mandatory Cost Rate shall be the rate determined by the Bank (and
           rounded upward, if necessary, to 4 decimal places) as the rate
           resulting from the application (as appropriate) of the following
           formulae:

           in relation to an Advance denominated in Sterling: 
                                                         XL + S(L-D) + F X 0.01
                                                         ----------------------
                                                             100 - (X + S)

           in relation to an Advance denominated in a currency other than 
           Sterling:
           F X 0.01                                                            
           --------
             300

           where on the day of application of a formula:

           X          is the percentage of Eligible Liabilities (in excess of
                      any stated minimum) by reference to which the Bank is
                      required under or pursuant to the Act to maintain cash
                      ratio deposits with the Bank of England;

           L          is the BBA Sterling LIBOR rate quoted at or about 
                      11.00 a.m. on Telerate (now  at page 3750) on
                      that day;

           F.         is the rate of charge payable by the Bank to the FSA
                      pursuant to paragraph 2.02 of the Fees Regulations (but
                      where, for this purpose, the figure at paragraph 2.02b of
                      the Fees Regulations shall be deemed to be zero) and
                      expressed in pounds per (pound)1 million of the Fee Base
                      of the Bank;

           S          is the level of interest bearing Special Deposits,
                      expressed as a percentage of Eligible Liabilities, which
                      the Bank is required to maintain by the Bank of England
                      (or other United Kingdom governmental authorities or
                      agencies); and

           D          is the percentage rate per annum payable by the Bank of
                      England to the Bank on Special Deposits.

           (X, L, S and D shall be expressed in the formula as numbers and not
           as percentages, e.g. if X = 0.15%and L = 7%, XL will be calculated as
           0.15 x 7 and not as 0.15% x 7%. A negative result obtained from
           subtracting D from L shall be counted as zero.)

3.         The Mandatory Cost Rate attributable to an Advance or other sum for
           any period shall be calculated at or about 11.00 a.m. on the first
           day of that period for the duration of that period.

                                      -40-

<PAGE>

4.         The determination of the Mandatory Cost Rate in relation to any
           period shall, in the absence of manifest error, be conclusive and
           binding on the Parties.

5.         If there is any change in circumstance (including the imposition of
           alternative or additional requirements) which in the reasonable
           opinion of the Bank renders or will render either of the above
           formulae (or any element of the formulae, or any defined term used in
           the formulae) inappropriate or inapplicable, the Bank shall be
           entitled to vary the same by giving notice to the Borrower. Any such
           variation shall, in the absence of manifest error, be conclusive and
           binding on the Parties and shall apply from the date specified in
           such notice.

           For the purposes of this Schedule:

                      "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
                      meanings given to those terms under or pursuant to the Act
                      or by the Bank of England (as may be appropriate), on the
                      day of the application of the formula.

                      "FEE BASE" has the meaning given to that term for the
                      purposes of, and shall be calculated in accordance with,
                      the Fees Regulations.

                      "FEES REGULATIONS" means, as appropriate, either:

                      (a)       the Banking Supervision (Fees) Regulations 1998;
                                or

                      (b)       such regulations as from time to time may be in
                                force, relating to the payment of fees for
                                banking supervision in respect of periods
                                subsequent to 31 March 1999.

                                      -41-

<PAGE>

THE BORROWER

SIGNED BY                                   )

                                            )

for and on behalf of                        )
EUROPEAN MICRO PLC                          )




THE BANK

SIGNED BY                                   )

                                            )

for and on behalf of                        )
NATIONAL WESTMINSTER BANK PLC               )


                                      -42-