CREDIT AGREEMENT

                                      AMONG

                          PLM EQUIPMENT GROWTH FUND VI


                                       AND

                           THE LENDERS LISTED HEREIN,

                                       AND

                            COMERICA BANK-CALIFORNIA,
                                    as Agent







                                December 21, 2001



<PAGE>


                                CREDIT AGREEMENT


     THIS CREDIT AGREEMENT is entered into as of December 21, 2001, by and among
PLM EQUIPMENT GROWTH FUND VI, a California limited partnership  ("Borrower") and
the banks,  financial  institutions and institutional  lenders from time to time
party  hereto and  defined  as  Lenders  herein,  and  COMERICA  BANK-CALIFORNIA
("Comerica Bank") not in its individual  capacity,  but solely as agent (in such
capacity, "Agent").

                                    RECITALS

     Lenders have agreed to make advances of credit  available to Borrower,  but
only upon the terms and subject to the conditions  hereinafter  set forth and in
reliance on the representations and warranties set forth herein.

                                    AGREEMENT

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

SECTION 1.        DEFINITIONS.

     1.1 Defined Terms.  As used herein,  the following terms have the following
meanings:

     "Acquisub" means Acquisub, LLC, a Delaware limited liability company.

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

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

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

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


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

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

     "Agreement"  means this Credit  Agreement  dated as of December  21,  2001,
including  all  amendments,  modifications  and  supplements  hereto,  renewals,
extensions or restatements hereof, and all appendices, exhibits and schedules to
any of the  foregoing,  and shall refer to the  Agreement  as the same may be in
effect from time to time.

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

     "Aircraft  Lease  Agreement"  means that certain Amended and Restated Lease
Agreement  (2001 N907TW),  dated as of November 13, 2001,  between TEC, as Owner
Trustee (lessor)  ("Aircraft  Owner Trustee") and TWA Airlines,  LLC, a Delaware
limited  liability  company  (lessee)  ("Aircraft  Lessee")  for the lease  from
Aircraft  Owner Trustee to Aircraft  Lessee of the one  McDonnell  Douglas MD-82
Series  Aircraft  U.S.  Reg.  No.  N907TW and the Engines  (as defined  therein)
(collectively,  the "Aircraft Collateral"), as the same may be modified, amended
or supplemented from time to time.

     "Aircraft  Owner Trust" means the owner trust created by the Aircraft Owner
Trust Agreement.

     "Aircraft  Owner Trust  Agreement"  means the Amended  and  Restated  Trust
Agreement dated as of December 24, 1997 between  Borrower,  as beneficiary,  and
the Aircraft Owner Trustee, as owner trustee, including all annexes,  schedules,
supplements and exhibits thereto, all as amended,  modified or supplemented from
time to time.

     "American" means American Airlines, Inc., a Delaware corporation.

     "Applicable Margin" means:

          (a) with respect to Base Rate Loans, one-half of one percent (0.5%);

          (b) with respect to LIBOR Loans, two and one-half percent (2.5%); and

          (c) with respect to Cost of Funds Rate Loans, two and one-half percent
(2.5%).

     "Approved  Appraiser"  means Marshall and Stevens or any other appraiser of
Equipment  proposed by Borrower and acceptable to Agent in its sole and absolute
discretion.

     "Asset Coverage Ratio" means, as at any date of determination, the ratio of
(a) the sum of (i)  Borrower's  investments  in assets  properly  classified  as
"cash" or "cash  equivalents"  under GAAP,  and which conform to the  investment
policies adopted by FSI, as the sole general partner of Borrower,  and (ii) Fair
Market  Value of  Eligible  Inventory  (but  only to the  extent  of  Borrower's
proportional share of ownership in such Eligible Inventory) as determined by FSI
in good faith, as sole general partner of Borrower,  as of the end of the fiscal
quarter of Borrower immediately preceding such date of determination (subject to
re-determination  by  an  Approved  Appraiser  pursuant  to  Section  5.2  whose
determination shall be final), to (b) Total Funded Debt.

     "Asset  Coverage Ratio  Compliance  Certificate"  means a certificate  with
appropriate  insertions setting forth evidence of Borrower's compliance with the
Asset Coverage Ratio, as of the last day of the month for which such certificate
is submitted  or as of a requested  Funding  Date,  which  certificate  shall be
substantially in the form set forth in Exhibit C, and certified by a Responsible
Officer of Borrower.

     "Assignment and Acceptance" has the meaning set forth in Section 11.10.2.

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

     "Base  Rate"  means the  greater of (i) the Prime Rate and (ii) the Federal
Funds Rate plus 0.50% per annum.

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

     "Borrower" has the meaning set forth in the Preamble.

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

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

     "Change of Control"  means (i) the failure after the date of this Agreement
of  Gary  Engle  or Jim  Coyne,  directly  or  indirectly,  through  one or more
intermediaries,  to own, whether beneficially or as a trustee, guardian or other
fiduciary,  fifty-one  percent  (51%) or more of (x) the stock  having  ordinary
voting  power in the election of  directors  or (y) the  ownership  interests of
either FSI, the Equipment  Manager,  or any Owner  Trustee,  or (ii) the failure
after  the date of this  Agreement  of Gary  Engle  or Jim  Coyne,  directly  or
indirectly,  through one or more  intermediaries,  to control FSI, the Equipment
Manager,  or any Owner Trustee.  For purposes of this  definition,  "control" of
FSI, the Equipment  Manager,  or any Owner  Trustee  shall mean the  possession,
directly or  indirectly,  of the power to direct or cause the  direction  of its
management or policies,  whether through the ownership of voting securities,  by
contract or otherwise.

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

     "Closing Date" means the date of this Agreement.

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

     "Collateral" means the Collateral  described in one or more of the Security
Agreements.

     "Comerica Bank" has the meaning set forth in the Preamble.

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

     "Commitment Termination Date" means June 30, 2003.

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

     "Consent and Agreement" means the Consent and Agreement executed by each of
Aircraft  Owner Trustee,  Borrower,  Aircraft  Lessee and American,  in favor of
Agent on behalf of Lenders, in form and substance acceptable to Agent.

     "Consolidated  EBIDA" means as measured as at any date of determination for
any period on a consolidated  basis,  the sum of (a) the Consolidated Net Income
of Borrower,  plus (b) all amounts treated as expenses for  depreciation and the
amortization of intangibles of any kind, plus (c) Consolidated Interest Expense,
plus (d)  non-liquidating  cash  distributions  received  from  Special  Purpose
Entities,  and in the cases of  clauses  (b) and (c)  above,  each to the extent
included in the determination of Consolidated Net Income.

     "Consolidated  Funded Debt" means, as measured at any date of determination
on a consolidated  basis, the total amount of all interest  bearing  obligations
(including  Indebtedness  for borrowed  money) of Borrower,  including,  without
limitation,  Obligations under this Agreement,  all capital lease obligations of
Borrower as a lessee,  and the stated amount of all outstanding  undrawn letters
of credit issued on behalf of Borrower or for which Borrower is liable.

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

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

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

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

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

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

     "Cost of Funds  Rate"  means,  as  applicable  to any  Loan,  and as of any
particular date,  Comerica Bank's funding cost on such date with respect to such
Loan as  determined by Comerica  Bank in its sole and absolute  discretion.  The
Cost of Funds Rate will be fixed on the date a Loan is converted  into a Cost of
Funds Rate Loan until such Loan shall have been fully repaid.

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

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

     "Designated  Deposit Account" means a demand deposit account  maintained by
Borrower with Comerica Bank designated by written notice from Borrower to Agent.

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

     "Effective  Amount"  means  with  respect  to any  Loans on any  date,  the
aggregate  outstanding  principal  amount  thereof  after  giving  effect to any
borrowing and prepayments or repayments thereof occurring on such date.

     "Eligible Assignee" means (a) a commercial bank organized under the laws of
the United States,  or any state thereof;  (b) a commercial bank organized under
the laws of any other country which is a member of the Organization for Economic
Cooperation and  Development  ("OECD"),  or a political  subdivision of any such
country, provided,  however, that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is also
a member of the OECD or the Cayman Islands;  (c) the central bank of any country
which is a member of the OECD; (d) an insurance company organized under the laws
of the  United  States;  (e) a  commercial  finance  company,  mutual  or  other
investment  fund,  lease  financing  company  or  other  institutional  investor
(whether a corporation,  partnership,  trust or other entity) that is engaged in
making,  purchasing or otherwise  investing in commercial  loans in the ordinary
course of its business,  provided that such Person is an  "accredited  investor"
(as defined in Regulation D under the Securities  Act of 1933, as amended);  (f)
any Lender party to this Agreement;  (g) any Lender  Affiliate and (h) any other
Person  approved by Agent and  Borrower,  such  approval not to be  unreasonably
withheld;  provided, however, that (i) Borrower's approval shall not be required
so long as an  Event of  Default  has  occurred  and is  continuing  and (ii) an
Affiliate of Borrower shall not qualify as an Eligible Assignee.

     "Eligible  Inventory"  means all  Trailers,  Aircraft and Aircraft  engines
complying  with  Stage  III  noise  reduction  requirements,   Railcars,  marine
containers,  the marine vessel, LION, and, if approved by the Requisite Lenders,
other related Equipment, in each case that (a) is owned of record by Borrower or
a Special  Purpose  Entity (or jointly by Borrower  and  Acquisub or one or more
Equipment  Growth Funds) or, subject to the approval of Agent, any Owner Trustee
of which Borrower or a Special  Purpose Entity is the sole  beneficiary or owner
(or is the  beneficiary  or owner jointly with Acquisub or one or more Equipment
Growth  Funds),  as  applicable,  (b) has a value and  marketability  reasonably
satisfactory  to the Agent;  and (c) is free and clear of all Liens,  except (i)
any interest of a lessee thereof  pursuant to a Lease entered into with Borrower
or a Special  Purpose  Entity or  Borrower's  or such Special  Purpose  Entity's
predecessor in interest or such Owner Trustee or nominee entity,  as lessor,  or
(ii) as otherwise  permitted by Section 6.1, provided that any Liens of the type
permitted  under clause (ii)  encumbering any item of Equipment shall not secure
obligations in amounts which materially  impair the equity value in such item of
Equipment.  Notwithstanding  anything to the  contrary in the  foregoing,  there
shall be excluded from the definition of Eligible  Inventory the following:  (a)
items which are off-lease for more than ninety-two (92) days, (b) containers and
Trailers  subject to Utilization  Leases whereby the  utilization  rates of such
items of Equipment fall below fifty percent (50%), (c) any marine vessel,  other
than the marine vessel, LION, and (d) the Aircraft Collateral, so long as all of
the conditions set forth in Section 3.3 below have not been satisfied or waived.
Equipment which is Eligible Inventory will cease to be Eligible Inventory at any
time,  but  only  for so long  as,  it  either  (1)  fails  to  meet  all of the
requirements  of clauses (a) through (c) set forth in the first sentence of this
definition  or (2) falls in the  category of items  listed in any of the clauses
(a)  through  (d) set forth in the  immediately  preceding  sentence.  Requisite
Lenders  in their  sole  discretion,  on a case by case  basis,  may  approve in
writing  any  other  items or types of  Equipment  for  credit  under  "Eligible
Inventory" from time to time.

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

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

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

     "Environmental Permit" has the meaning set forth in Section 4.15.

     "Equipment" means all items of equipment  permitted to be owned directly or
beneficially  by Borrower  pursuant to the terms and  conditions  of the Limited
Partnership Agreement, as such terms and conditions are in effect on the Closing
Date, and owned directly or  beneficially  by Borrower or by any Special Purpose
Entity (or jointly by Borrower or any Special Purpose Entity and Acquisub or one
or more Equipment Growth Funds) and held for lease or rental,  and shall include
items of equipment  legal or record title to which is held by any Owner  Trustee
or nominee entity in which Borrower or any Special Purpose Entity holds the sole
beneficial  interest (or jointly by Borrower or any Special  Purpose  Entity and
Acquisub or one or more Equipment Growth Funds).

     "Equipment  Schedule"  means  a  certificate  with  appropriate  insertions
setting  forth (a) a list of each item of  Equipment  forming  part of  Eligible
Inventory,  including a description of each Lease and the lessee thereunder, and
(b) the Fair Market Value of Eligible  Inventory  determined  by FSI in its good
faith on a quarterly basis,  each as of the last day of the month for which such
certificate is submitted or as of a requested  Funding Date, as the case may be,
which certificate shall be substantially in the form set forth in Exhibit B, and
certified by a Responsible Officer of Borrower.

     "Equipment  Growth Funds" means any and all of PLM Equipment Growth Fund I,
Equipment  Growth Fund II, PLM Equipment  Growth Fund III, PLM Equipment  Growth
Fund  IV,  PLM  Equipment  Growth  Fund V,  PLM  Equipment  Growth  Fund VII and
Professional Lease Management Income Fund I, L.L.C.

     "Equipment  Manager"  means IMI or an  Affiliate of IMI, in its capacity as
equipment manager under the Management Agreements.

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

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

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

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

     "Existing Note  Agreement"  means that certain Note  Agreement  dated as of
August 1, 1993 among Borrower,  as company,  and Allstate  Insurance Company and
Allstate Life Insurance Company, as purchasers.

     "Existing  Notes"  means  the  notes  issued by  Borrower  pursuant  to the
Existing Note Agreement.

     "FAA" or "Federal Aviation  Administration" means the United States Federal
Aviation  Administration  or any successor  thereto  administering the functions
thereof.

     "Facility"  means the total  Commitments  described  in Schedule A, as such
Schedule A may be amended  from time to time as set forth on Schedule  1.1,  for
the credit  facility  described  in Section  2.1.1 to be  provided by Lenders to
Borrower, according to each Lender's Pro Rata Share.

     "Fair  Market Value of Eligible  Inventory"  means the fair market value of
the Eligible Inventory as determined by an Approved Appraiser,  or, for purposes
of the  Equipment  Schedule,  by  FSI,  as sole  general  partner  of  Borrower,
reasonably satisfactory to Agent.

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

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

     "Fee  Letter"  means  that  certain  letter  dated as of the  Closing  Date
executed  by  Borrower  in favor of Agent  with  respect  to the  agency fee and
certain  other  matters,  as the  same  may  from  time to time  be  amended  or
supplemented.

     "First Amendment to Warehousing  Credit Agreement" means that certain First
Amendment to Warehousing Credit Agreement, of even date herewith,  providing for
(a) the  reduction  in Comerica  Bank's  commitment,  as  successor by merger to
Imperial  Bank,  under the  Warehousing  Credit  Agreement  from  $10,000,000 to
$5,000,000, and the reduction of the total commitment of lenders pursuant to the
Warehousing Credit Agreement from $15,000,000 to $10,000,000,  (b) the amendment
to  certain  covenants  applicable  to  Borrower  under the  Warehousing  Credit
Agreement, and (c) other amendments and modifications as required by the lenders
thereunder, in form and substance similar to Exhibit K.

     "Form W-8BEN" has the meaning set forth in Section 2.14.6.

     "Form W-8ECI" has the meaning set forth in Section 2.14.6.

     "FSI" means PLM Financial  Services,  Inc., a Delaware  corporation and the
sole general partner of Borrower.

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

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

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

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

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

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

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

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

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

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

     "Interest  Payment Date" means, (a) with respect to any Base Rate Loan, (x)
the last  Business Day of each fiscal  quarter of Borrower  commencing  with the
last Business Day of the fiscal quarter of Borrower in which the Funding Date of
such Loan occurs, or (y) if any Base Rate Loan is converted into a LIBOR Loan or
a Cost of Funds Rate Loan pursuant to Section 2.8, the date of such  conversion,
and (b) with respect to any Cost of Funds Rate Loan,  (x) the last  Business Day
of each fiscal quarter of Borrower  commencing with the last Business Day of the
fiscal quarter of Borrower in which the Funding Date of such Loan occurs, or (y)
if any LIBOR Loan or Base Rate Loan is converted into a Cost of Funds Rate Loan,
the last  Business Day of each fiscal  quarter of Borrower  commencing  with the
last  Business  Day of the fiscal  quarter of Borrower in which such  conversion
date occurs.

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

     "Investment" means, when used in connection with any Person, any investment
by or of that Person, whether by means of purchase or other acquisition of stock
or other  securities  of any other Person or by means of loan or advance  (other
than advances to employees for moving or travel  expenses,  drawing accounts and
similar expenditures in the ordinary course of business),  capital contribution,
guaranty or other debt or equity participation or interest, or otherwise, in any
other Person,  including  any  partnership  and joint venture  interests of that
Person in any other  Person or in any item of  transportation-related  equipment
owned by a Person  unaffiliated  with that Person and on lease to another  third
party, in which that Person acquires a right to share, directly or indirectly.

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

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

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

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

     "Lenders" means the banks,  financial  institutions or other  institutional
lenders which have  executed  signature  pages to this  Agreement and such other
Assignees, banks, financial institutions or other institutional lenders as shall
hereafter  execute and deliver an Assignment and Acceptance  with respect to all
or any portion of the Commitments and the Loans advanced and maintained pursuant
to the  Commitments,  in each case  pursuant to and in  accordance  with Section
11.10.

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

     "Leverage Ratio" means, as at any date of  determination,  the ratio of (a)
Consolidated  Total Liabilities of Borrower to (b) the Consolidated Net Worth of
Borrower.

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

     "LIBOR  Interest  Payment Date" means,  with respect to any LIBOR Loan, the
last day of each  Interest  Period  applicable  to such  LIBOR  Loan;  provided,
however,  that if any Interest Period for a LIBOR Loan exceeds three (3) months,
interest  shall also be paid on the date which falls three (3) months  after the
beginning of such Interest Period,  and every three months  thereafter until the
end of the applicable Interest Period.

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

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

     "Limited  Partnership  Agreement"  means the Amended and  Restated  Limited
Partnership  Agreement of Borrower  dated as of December 20, 1991, as amended by
that  certain  First  Amendment  to Amended  and  Restated  Limited  Partnership
Agreement,  dated as of November  21,  1996,  as further  amended by that Second
Amendment to Amended and Restated  Limited  Partnership  Agreement,  dated as of
August 24, 2001 ("Second Amendment to Limited Partnership Agreement").

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

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

     "Loan Parties" means  Borrower,  Aircraft Owner Trustee,  the  Subordinated
Lenders,  any other Owner Trustee,  and any Special Purpose Entity,  and a "Loan
Party" means any one of the Loan Parties.

     "Management  Agreements"  means,  collectively  (a) that certain  Equipment
Management  Agreement,  dated as of December 23, 1991, entered into on behalf of
Borrower by FSI with its  Affiliate,  IMI,  pursuant  to Section  2.05(f) of the
Limited  Partnership  Agreement,  (b) that  certain  Data  Processing  Servicing
Agreement,  dated as of June 21, 1996, entered into on behalf of Borrower by FSI
with its  Affiliate,  IMI, and (c) that certain  Equipment  Services  Agreement,
dated as of June 21,  1996,  entered  into on behalf of Borrower by FSI with its
Affiliate, IMI.

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

     "Maturity  Date"  means,  with  respect  to each Loan  advanced  by Lenders
hereunder, the following date: (a) if the Funding Date of such Loan occurs on or
before  the last  Business  Day of the  second  month of any  fiscal  quarter of
Borrower,  then the last Business Day of the twentieth  (20th) fiscal quarter of
Borrower after the fiscal quarter of Borrower in which such Funding Date occurs,
and (b) if the  Funding  Date of any Loan  occurs  during the third month of any
fiscal quarter of Borrower,  then the last Business Day of the twentieth  (20th)
fiscal  quarter of Borrower  after the fiscal  quarter of  Borrower  immediately
following  the  Funding  Date of such  Loan,  or such  earlier  or later date as
requested  by Borrower  and  approved by  Requisite  Lenders,  in their sole and
absolute discretion.

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

     "Net Cash Proceeds From the Disposition of Equipment" means, for any period
of  determination,  the sum of (a)  Borrower's  cash balance at the beginning of
such period and (b) cash received by Borrower from disposition of Equipment plus
without  duplication  liquidating  distributions  from Special Purpose  Entities
during such  period less  payments  made by  Borrower  for the  purchase of such
Equipment and associated  expenses including but not limited to, acquisition and
negotiation fees.

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

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

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

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

     "Operating   Cash  Flow  Coverage   Ratio"   means,   as  at  any  date  of
determination,  the ratio of (a)  Consolidated  EBIDA of Borrower  adjusted  for
gains or losses on the sale of Equipment  in the ordinary  course of business to
the extent not already taken into account in the  determination  of Consolidated
EBIDA to (b) the sum of (i) the  aggregate  amount of principal  payments due on
Consolidated  Funded  Debt  (excluding  the  Revolver  Loans)  during  the  four
consecutive  fiscal  quarters   immediately   succeeding  such  date  plus  (ii)
Consolidated  Interest Expense of Borrower plus (iii) twenty-five  percent (25%)
of the aggregate principal amount of the Revolver Loans outstanding on such date
(excluding  principal amounts of Revolver Loans outstanding for ninety (90) days
or less).  Consolidated  EBIDA and Consolidated  Interest Expense to be measured
for the four consecutive fiscal quarters then ended on such date.

     "Opinion of Company  Counsel" means the favorable  written legal opinion of
Borrower's counsel, substantially in the form of Exhibit D.

     "Opinion of FAA  Counsel"  means the  favorable  written  legal  opinion of
counsel  acceptable  to  Agent in its sole  and  absolute  discretion  regarding
perfection of the security  interest in the  Collateral  created by the Aircraft
Security Agreement filed with the FAA on the Funding Date of the second Advance.

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

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

     "Owner  Trustee"  means any Person  acting in the capacity of (a) a trustee
for any owner trust or (b) a nominee  entity,  in each case holding record title
to any Eligible Inventory for the beneficial interest of Borrower or any Special
Purpose Entity (or for the joint beneficial  interest of Borrower or any Special
Purpose Entity and Acquisub or one or more Equipment Growth Funds) pursuant to a
trust or similar  agreement with Borrower.  For the avoidance of any doubt,  the
term "Owner Trustee" includes the Aircraft Owner Trustee.

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

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

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

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

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

     "PFF" means PFF Bank & Trust.

     "PLMI"  means PLM  International,  Inc.,  a  Delaware  corporation,  or any
successor in interest thereof.

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

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

     "Prepayment  Premium" means, on any prepayment date and with respect to any
Cost of Funds  Rate Loan  being  prepaid,  the sum of (i) Five  Hundred  Dollars
($500),  and (ii) the present value,  discounted at the Reinvestment Rate of the
positive  amount by which the  interest  the  Lenders  would have earned had the
prepaid  principal  amount been paid  according  to the Cost of Fund Rate Loan's
amortization  schedule at the Cost of Funds Rate Loan  interest rate exceeds the
interest the Lenders would earn by reinvesting the prepaid  principal  amount at
the Reinvestment Rate.

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

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

     "Pro Rata  Share"  means,  as to any  Lender at any  time,  the  percentage
equivalent (expressed as a decimal,  rounded to the ninth decimal place) at such
time of the  Effective  Amount of such  Lender's  Loans divided by the Effective
Amount of all Loans, or if no Loans are outstanding,  the percentage  equivalent
(expressed  as a decimal,  rounded to the ninth  decimal  place) at such time of
such Lender's aggregate  Commitments divided by the aggregate Commitments or, if
the  Commitments  have expired or been  terminated and all Loans repaid in full,
the percentage equivalent (expressed as a decimal,  rounded to the ninth decimal
place) of the Effective  Amount of such Lender's  Loans divided by the aggregate
Effective Amount of all Loans immediately before such repayment in full.

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

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

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

     "Reinvestment  Rate" means,  on any prepayment date and with respect to any
Cost of Funds Rate Loan being  prepaid,  the interest  rate equal to the rate of
interest  reasonably  determined by Agent (based on quotations from  established
dealers) to be in effect in the secondary market of U.S. Treasury Obligations of
a  comparable  amount as the  outstanding  principal  amount of such Loan  being
prepaid or deemed to have been prepaid and with a  comparable  term to maturity,
not more than seven (7) days prior to such prepayment date plus one-half percent
(0.5%) per annum.

     "Revolver  Loans" means Loans made to Borrower  pursuant to the Warehousing
Credit Agreement.

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

     "Requisite  Lenders"  means any  combination  of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this  Agreement,  or, in the event there are no amounts  outstanding,  the
Commitments,  is greater than sixty-six and two-thirds  percent (66 2/3%) of all
such amounts outstanding or the total Commitments, as the case may be; provided,
however,  that in the event there are only two (2)  Lenders,  Requisite  Lenders
means both Lenders.

     "Responsible Officer" means for (i) Borrower,  any of the President,  Chief
Executive Officer,  Executive Vice President, Chief Financial Officer, Secretary
or Corporate  Controller  of FSI, or another  officer  authorized by FSI, as the
sole  general  partner of  Borrower,  having  authority  to request  Advances or
perform other duties required  hereunder,  and (ii) any other Loan Party, any of
the  President,   Chief  Executive  Officer,  Executive  Vice  President,  Chief
Financial  Officer,   Secretary  or  Corporate  Controller  or  another  officer
authorized thereof.

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

     "Security  Agreements" means,  collectively,  (1) the Security Agreement of
even date herewith (the "Security  Agreement")  between  Borrower and Agent,  on
behalf and for the benefit of the Lenders, providing for the grant of a security
interest in all of the assets of Borrower,  subject to no other Liens other than
Permitted  Liens,  substantially  in  the  form  of  Exhibit  J,  including  all
amendments,  modifications and supplements thereto and all appendices,  exhibits
and schedules to any of the foregoing, as the same may be in effect from time to
time, (2) the Aircraft  Security and Assignment  Agreement in form and substance
acceptable to Agent (the "Aircraft  Security  Agreement"),  executed by Aircraft
Owner  Trustee in favor of Agent on behalf of  Lenders,  granting  to Agent,  on
behalf of Lenders, a security interest in the Aircraft  Collateral and assigning
to Agent on behalf of Lenders,  the  Aircraft  Lease  Agreement  and any related
documents and agreements, as security for the payment and performance in full of
the Obligations, subject to no other Liens other than Permitted Liens, including
all  amendments,  modifications  and  supplements  thereto  and all  appendices,
exhibits  and  schedules to any of the  foregoing,  as the same may be in effect
from time to time, and (3) the Beneficial Interest Pledge and Security Agreement
in form and substance acceptable to Agent (the "Pledge and Security Agreement"),
executed by the Borrower in favor of Agent on behalf of Lenders,  assigning  the
Borrower's  beneficiary  rights in the Aircraft  Owner Trust as security for the
payment and  performance in full of the  Obligations,  subject to no other Liens
other  than  Permitted  Liens,  including  all  amendments,   modifications  and
supplements  thereto and all  appendices,  exhibits and  schedules to any of the
foregoing, as the same may be in effect from time to time.

     "Security Documents" means the Security Agreements,  each chattel mortgage,
ship  mortgage or similar  security  agreement,  mortgage or other  agreement or
document  entered  into with  respect to this  Agreement,  each UCC-1  financing
statement delivered pursuant thereto and any and all other related documents.

     "Settlement Order" means, collectively, (a) that certain Order, dated as of
July 24, 2001 ("Order"),  issued by the Honorable  Senior United States District
Judge in the matter of KOCH V. PLM  INTERNATIONAL,  INC., ET. AL.,  adopting the
Report and  Recommendation,  dated as of April 25, 2001, issued by the Honorable
United States  Magistrate Judge for the Southern  District of Alabama,  Southern
Division,  for the settlement of the litigation involving Borrower entitled KOCH
V. PLM INTERNATIONAL,  INC., ET. AL., and (b) that certain Judgment, dated as of
July 24, 2001,  issued by the Honorable  Senior United States  District Judge in
the matter of KOCH V. PLM INTERNATIONAL, INC., ET. AL., approving the Order.

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

     "Special  Purpose Entity" means any Person in which the ownership  interest
is held by Borrower,  either wholly or jointly with one or more Equipment Growth
Funds, and organized for the purpose of owning  equipment  permitted to be owned
by Borrower  pursuant  to the terms and  conditions  of the Limited  Partnership
Agreement, as such terms and conditions are in effect on the Closing Date.

     "Subordination Agreement" means the Intercompany Subordination Agreement of
even date  herewith  among FSI,  PLMI,  TEC, and IMI  ("Subordinated  Lenders"),
Borrower,  and Agent,  substantially  in the form of Exhibit  E,  including  all
amendments,  modifications and supplements thereto and all appendices,  exhibits
and schedules to any of the foregoing, as the same may be in effect from time to
time.

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

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

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

     "Termination  Date" means the date which is the later of (a) the Commitment
Termination Date and (b) the date of full, complete and indefeasible payment and
performance of the Obligations.

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

     "Total Cash Flow Coverage Ratio" means, with respect to Borrower, as at any
date of determination,  the ratio of (a) Consolidated EBIDA of Borrower adjusted
for gains or losses on the sale of Equipment in the ordinary  course of business
to  the  extent  not  already  taken  into  account  in  the   determination  of
Consolidated  EBIDA  plus (i) the Net Cash  Proceeds  From  the  Disposition  of
Equipment  in  the  ordinary  course  of  business   received  during  the  four
consecutive  fiscal quarters ending on such date less (ii) aggregate  amounts of
cash  distributions  to its  partners  made during the four  consecutive  fiscal
quarters  ending on such  date,  to (b) the sum of (i) the  aggregate  amount of
principal  payments on  Consolidated  Funded Debt (excluding the Revolver Loans)
made during the four  consecutive  fiscal quarters ending on such date plus (ii)
Consolidated  Interest Expense of Borrower plus (iii) twenty-five  percent (25%)
of the aggregate principal amount of the Revolver Loans outstanding on such date
(excluding  principal amounts of Revolver Loans outstanding for ninety (90) days
or less).  (Consolidated EBIDA and Consolidated  Interest Expense to be measured
for the four consecutive fiscal quarters then ended on such date).

     "Total  Funded  Debt" means  Consolidated  Funded  Debt less the  aggregate
principal amount of the Revolver Loans outstanding for ninety (90) days or less.

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

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

     "United States" means the United States of America.

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

     "Warehousing  Credit  Agreement"  means  that  certain  Warehousing  Credit
Agreement, dated as of April 13, 2001, by and among FSI, Borrower, Acquisub, PLM
Equipment  Growth  Fund VII and  Professional  Lease  Management  Income Fund I,
L.L.C, on the one hand and Imperial Bank, as Agent,  and other lenders listed as
"Lenders"  therein,  on the other  hand,  as amended by the First  Amendment  to
Warehousing Credit Agreement, and as the same may be further amended,  restated,
modified or supplemented from time to time.

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

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

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

SECTION 2. AMOUNT AND TERMS OF CREDIT.

     2.1 Commitment To Lend.

          2.1.1  Term  Facility.  Subject  to the terms and  conditions  of this
Agreement and in reliance upon the  representations  and  warranties of Borrower
set forth herein,  Lenders  hereby agree to make Advances (as defined  below) of
immediately available funds to Borrower from the Closing Date until the Business
Day  immediately  preceding the  Commitment  Termination  Date, in the aggregate
principal amount outstanding at any time not to exceed the total Commitments for
the Facility, as more fully set forth in this Section 2.1.1.

               (a) Facility Commitments.

                    (i)  On  the  Funding  Date  requested  by  Borrower,  after
Borrower shall have satisfied all applicable  conditions  precedent set forth in
Section 3, each Lender shall advance immediately  available funds to Agent (each
such advance  being an "Advance")  evidencing  such Lender's Pro Rata Share of a
loan ("Loan").  Agent shall immediately advance such immediately available funds
to Borrower at the Designated  Deposit Account (or such other deposit account at
Comerica Bank or such other financial institution as to which Borrower and Agent
shall  agree at least three (3)  Business  Days prior to the  requested  Funding
Date) on the Funding  Date with  respect to such Loan.  The  Borrower  shall pay
interest accrued on the Loan at the rates and in the manner set forth in Section
2.1.1(b).  Each Loan advanced hereunder by each Lender shall be evidenced by the
Borrower's  promissory note in favor of such Lender substantially in the form of
Exhibit A (each a "Note").

                    (ii)  Nothing  contained in this  Agreement  shall under any
circumstance  be deemed to  require  any  Lender to make any  Advance  under the
Facility  which,  in the aggregate  principal  amount,  taking into account such
Lender's portion of the principal  amounts  outstanding under this Agreement and
the making of such Advance, exceeds such Lender's Commitment for the Facility.

                    (iii) Amounts  borrowed by Borrower under this Facility that
are  repaid or  prepaid  may not be  reborrowed.  No LIBOR  Loan  shall  have an
Interest  Period  ending  more than  thirty  (30) days after the  Maturity  Date
thereof.  Notwithstanding  anything to the contrary in the  foregoing,  Borrower
shall  repay  the  outstanding  principal  of all LIBOR  Loans  and all  accrued
interest  thereon  on the  respective  Maturity  Dates of such  LIBOR  Loans and
nothing in the  foregoing  shall be deemed to be an extension  of such  Maturity
Date or waiver of  Borrower's  obligation  to pay any breakage  costs payable on
account of the Interest  Period of any LIBOR Loan ending after the Maturity Date
thereof.

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

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

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

               (c) Fees.

                    (i) In connection with the extension of the Loans,  Borrower
shall pay to the Agent for the account of each Lender,  on the date of execution
and delivery of this Agreement, a fully earned and non-refundable commitment fee
equal  to  one-half  of  one  percent   (0.50%)  of  such  Lender's   Commitment
("Commitment  Fee").  Any good faith  deposit  deposited by Borrower with Agent,
after  deducting  therefrom  Agent's  expenses and costs  (including  reasonable
attorneys'  fees)  incurred by or on behalf of Agent or any Lender in connection
with the preparation  and  negotiation of the Loan  Documents,  shall be applied
toward the Commitment Fee due from Borrower hereunder.

                    (ii)  Borrower  shall pay to Agent for the  account  of each
Lender a commitment  fee on the average  daily unused  portion of such  Lender's
Commitment,  computed on a quarterly basis based upon the daily  utilization for
that  quarter as  calculated  by the Agent,  equal to  one-half  of one  percent
(0.50%) per annum.  Such commitment fee shall accrue from the date hereof to the
Commitment Termination Date and shall be due and payable quarterly in arrears on
the last Business Day of each March, June, September,  and December,  commencing
on  March  31,  2002  with  the  final  payment  to be  made  on the  Commitment
Termination  Date. The commitment fees provided in this subsection  shall accrue
at all times after the date  hereof,  including  at any time during which one or
more conditions in Section 3 are not met.

                    (iii)  Borrower  agrees  to pay to the  Agent  for  its  own
account, an agency fee in accordance with the Fee Letter.

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

          2.1.3  Utilization  Of The Loans.  The Loans  made under the  Facility
shall be used solely for the purpose of first  repaying the Existing Notes under
the Existing Note  Agreement and then for  Borrower's  acquisition of Equipment.
Notwithstanding  the foregoing,  any excess  proceeds of the Loans may remain as
Borrower's cash balances until applied to the acquisition of Equipment.

     2.2 Repayment And Prepayment; Reduction or Termination of Commitments.

          2.2.1  Repayment.  Unless prepaid  pursuant to Section 2.2.2 or 2.2.3,
the principal amount of each Loan made to Borrower  hereunder shall be repaid by
Borrower  as follows:  (a) if the Funding  Date of such Loan occurs on or before
the last  Business  Day of the second  month of any fiscal  quarter of Borrower,
then on the last Business Day of such fiscal quarter of Borrower and on the last
Business  Day of each  fiscal  quarter of  Borrower  thereafter,  and (b) if the
Funding Date of any Loan occurs during the third month of any fiscal  quarter of
Borrower,  then on the last  Business  Day of the  fiscal  quarter  of  Borrower
immediately following the Funding Date of such Loan and on the last Business Day
of each fiscal quarter of Borrower thereafter, in each case through the Maturity
Date of such Loan in twenty  (20) equal  quarterly  installments  of  principal.
Subject to the terms and  conditions  of this  Agreement,  the unpaid  principal
amount of each Loan and all unpaid interest accrued  thereon,  together with all
other fees,  expenses,  costs and other sums chargeable to Borrower  incurred in
connection therewith shall be due and payable no later than the Maturity Date of
such Loan.

          2.2.2 Voluntary  Prepayment.  Subject to Section 2.18, Borrower may in
the ordinary  course of  Borrower's  business,  upon at least three (3) Business
Days' written  notice,  or telephonic  notice  promptly  confirmed in writing to
Agent,  which notice shall be irrevocable,  prepay any Loan in whole or in part.
Such notice of prepayment  shall specify the date and amount of such  prepayment
and whether such prepayment is of Base Rate Loans,  LIBOR Loans or Cost of Funds
Rate Loans,  or any  combination  thereof;  provided that if an Event of Default
shall have occurred and be continuing, Lenders shall have the exclusive right to
apply any and all such prepayments against the then due and owing Obligations as
Lenders may deem advisable.  Such prepayment of Loans, together with any amounts
required  pursuant to Section 2.18, shall be in immediately  available funds and
delivered to Agent not later than 1:00 p.m.,  California  time,  on the date for
prepayment  stated in such notice (the "Prepayment  Date").  With respect to any
prepayment  under this Section 2.2.2, all interest on the amount prepaid accrued
up to but excluding the date of such prepayment  shall be due and payable on the
Prepayment  Date,  and the amount  prepaid  shall be  applied  to the  remaining
principal  installments in inverse order of maturity or, at Borrower's election,
ratably  based on the amount of such  prepayment;  provided  that if an Event of
Default shall have occurred and be continuing,  Lenders shall have the exclusive
right  to apply  any and all such  prepayments  against  the then due and  owing
Obligations as Lenders may deem advisable.

          2.2.3 Mandatory Prepayments.

               (a) In the  event  of a  reduction  in the Fair  Market  Value of
Eligible  Inventory  (other than due to a Casualty Loss) resulting in Borrower's
falling  out  of  compliance  with  the  Asset  Coverage  Ratio  required  to be
maintained  on any  date,  then  Borrower  shall  prepay  the Loans in an amount
sufficient  to return  Borrower to being in compliance  with the Asset  Coverage
Ratio on such date,  together with any amounts required by Section 2.18,  within
thirty  (30)   calendar  days  after   Borrower   shall  become  aware  of  such
non-compliance, whether by written notice from Agent or any Lender or otherwise.

               In the event that any item of Eligible Inventory shall be sold or
assigned by Borrower or any Special Purpose Entity,  or the ownership  interests
(whether by stock or otherwise) of Borrower in any Special Purpose Entity owning
record or beneficial  title to any item of Eligible  Inventory  shall be sold or
transferred,  resulting in Borrower's  falling out of compliance  with the Asset
Coverage  Ratio  required to be  maintained  on any date,  then  Borrower  shall
immediately prepay the Loans in an amount sufficient to return Borrower to being
in  compliance  with the Asset  Coverage  Ratio on such date  together  with any
amounts  required by Section 2.18. The sale or assignment of Eligible  Inventory
by an Owner  Trustee,  or the sale or  assignment  of  Borrower's or any Special
Purpose  Entity's  beneficial  interest in any owner  trust (or nominee  entity)
holding title to Eligible  Inventory,  shall be considered a sale or assignment,
as the case may be, of such  Eligible  Inventory  by  Borrower  or such  Special
Purpose  Entity,  as the case may be. At Borrower's  expense,  Agent will,  upon
receipt of the  prepayment,  release its  security  interest in the  Property or
assets so sold, assigned or transferred so long as no Potential Event of Default
or Event of Default has occurred and is continuing.



               In the event of a Casualty Loss  resulting in Borrower's  falling
out of compliance with the Asset Coverage Ratio required to be maintained on any
date,  then Borrower shall (1) promptly  provide notice of such Casualty Loss to
Agent,  and (2) prepay the Loans in an amount  sufficient to return  Borrower to
being in compliance  with the Asset  Coverage  Ratio,  together with any amounts
required  to be paid  pursuant  to Section  2.18,  immediately  upon  receipt of
insurance or other  proceeds  with respect to such Casualty Loss but in no event
later than ninety (90) days after the date of such Casualty Loss.

               (b) If at any time and for any  reason  the  aggregate  principal
amount of the  Loan(s)  then  outstanding  to  Borrower  shall  exceed the total
Commitment (the amount of such excess, if any, being an "Overadvance"), Borrower
shall immediately  repay the full amount of such Overadvance,  together with all
interest accrued thereon and any amounts required to be paid pursuant to Section
2.18.

               (c) In the event that Borrower conveys,  sells, leases,  assigns,
transfers  or  otherwise  disposes  of,  in  one  transaction  or  a  series  of
transactions,  all or  substantially  all of its  business,  Property or assets,
whether now owned or hereafter  acquired ("Asset  Disposition"),  Borrower shall
immediately pay to Agent, together with any amounts required to be paid pursuant
to Section  2.18,  one hundred  percent  (100%) of the net proceeds  received by
Borrower from such Asset Disposition, to be applied by Agent pursuant to Section
2.6,  except to the extent any such  proceeds  are  invested  by Borrower in the
purchase of Equipment within sixty (60) days of such Asset Disposition (unless a
Potential  Event of Default  or an Event of  Default  exists on the date of such
Asset Disposition or would result from such Asset Disposition, in which case the
proceeds  of the Asset  Disposition  shall be  immediately  paid by  Borrower to
Agent,  together with any amounts  required to be paid pursuant to Section 2.18,
to be applied by Agent pursuant to Section 2.6). Agent will, upon receipt of the
prepayment or  confirmation  of the purchase of  Equipment,  as the case may be,
release its  security  interest in the  Property or assets so sold or  otherwise
disposed of at  Borrower's  expense so long as no Potential  Event of Default or
Event of Default has occurred and is continuing.

          With  respect to any  prepayment  under this Section  2.2.3,  Borrower
shall provide Agent a written  notice of prepayment  that shall specify  whether
such prepayment is of Base Rate Loans,  LIBOR Loans or Cost of Funds Rate Loans,
or any  combination  thereof;  provided  that if an Event of Default  shall have
occurred and be continuing,  Lenders shall have the exclusive right to apply any
and all such prepayments  against the then due and owing  Obligations as Lenders
may deem  advisable.  Additionally,  with respect to any  prepayment  under this
Section 2.2.3,  all interest on the amount  prepaid  accrued up to but excluding
the  date  of  such  prepayment  shall  be due and  payable  on the  date of the
prepayment,  and the amount prepaid shall be applied to the remaining  principal
installments in inverse order of maturity.

          2.3  Calculation  Of Fees and Interest;  Post-Maturity  Interest.  All
computations  of fees  shall be made on the basis of a 360-day  year and  actual
days  elapsed.  Fees shall accrue  during each period during which such fees are
computed  from the first day  thereof to the last day  thereof.  Interest on the
Loans  shall be computed  on the basis of a  365/366-day  year for all Base Rate
Loans and a 360-day  year for all LIBOR  Loans and Cost of Funds  Rate Loans and
the  actual  number of days  elapsed in the period  during  which such  interest
accrues.  In computing interest on any Loan, the date of the making of such Loan
shall be included and the date of payment shall be excluded.  Each change in the
interest  rate of Base Rate  Loans  based on  changes  in the Prime  Rate or the
Federal  Funds Rate (as the case may be), and each change in the Adjusted  LIBOR
based on changes in the Eurodollar  Reserve Percentage shall be effective on the
effective date of such change and to the extent of such change. Agent shall give
Borrower  notice of any such change in the Prime Rate or the Federal Funds Rate;
provided,  however,  that any failure by Agent to provide  Borrower  with notice
hereunder shall not affect Agent's right to make changes in the interest rate of
any Loan based on changes in the Prime Rate or the Federal Funds Rate.  Upon the
occurrence  and  during  the  continuation  of any Event of  Default  under this
Agreement,  Advances  under this  Agreement  will,  at the  option of  Requisite
Lenders,  bear  interest at a rate per annum which is  determined  by adding two
percent  (2.00%) to the rate of interest  otherwise  chargeable for such Advance
("Default Rate").  The imposition of a Default Rate will not constitute a waiver
of any Event of Default.

          2.4 Manner Of Payments. All repayments or prepayments of principal and
all payments of interest,  fees,  costs,  expenses and other sums  chargeable to
Borrower  under this  Agreement,  the Notes or any of the other  Loan  Documents
shall  be in  lawful  money of the  United  States  of  America  in  immediately
available  funds and delivered to Agent,  for the account of Lenders,  not later
than 1:00 p.m.,  California  time, on the date due at Comerica  Bank-California,
275 Battery Street, Suite 1100, San Francisco, CA 94111, Attention: Misako Noda,
Vice President,  or such other place as shall have been designated in writing by
Agent.

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

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

          2.7 Procedure For The Borrowing Of Loans.

               2.7.1 Notice Of Borrowing.  Each borrowing of Loans shall be made
upon Borrower's  irrevocable  written notice delivered to Agent in the form of a
Notice of  Borrowing,  executed  by a  Responsible  Officer  of  Borrower,  with
appropriate  insertions  (which  Notice of  Borrowing  must be received by Agent
prior to 12:00 noon,  San  Francisco,  California  time,  five (5) Business Days
prior to the requested Funding Date) specifying:

                    (a) the  amount  of the  requested  borrowing,  which,  with
respect to any LIBOR Loan or Base Rate Loan,  shall be in an  aggregate  minimum
amount of $5,000,000,  and with respect to any Cost of Funds Rate Loan, shall be
in an aggregate  minimum  amount of  $10,000,000  (unless the  available  amount
remaining  to be  borrowed  under  the  Facility  is  less  than  $5,000,000  or
$10,000,000,  as  applicable,  in which  case the  aggregate  minimum  amount of
borrowing shall be such lower amount);

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

                    (c) whether the  borrowing is to be comprised of one or more
LIBOR  Loans,  Base Rate  Loans or Cost of Funds  Rate  Loans;  if the Notice of
Borrowing  shall fail to specify  whether the  borrowing  is to be  comprised of
LIBOR Loans, Base Rate Loans or Cost of Funds Rate Loans, the borrowing shall be
comprised entirely of Base Rate Loans; and

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

               2.7.2 Unavailability Of LIBOR Loans. Unless the Requisite Lenders
shall otherwise consent, Borrower may not elect to have any Loan made as a LIBOR
Loan during the existence of an Event of Default or Potential Event of Default.

          2.8 Conversion And Continuation Elections.

               2.8.1 Election.  Borrower may, upon irrevocable written notice to
Agent:

                    (a) elect to convert on any Business Day, any Base Rate Loan
(or any portion thereof in an amount equal to at least  $5,000,000) into a LIBOR
Loan; or

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

                    (c) elect to continue on any LIBOR Interest Payment Date any
LIBOR Loan maturing on such LIBOR Interest Payment Date; or

                    (d) elect to convert on any Business Day, any Base Rate Loan
or any LIBOR Loan or any combination  thereof,  in each case, in an amount equal
to at least  $10,000,000  into a Cost of Funds Rate Loan;  provided that a LIBOR
Loan may be converted into a Cost of Funds Rate Loan only on the last day of the
applicable Interest Period.

provided,  that if the aggregate  amount of LIBOR Loans  outstanding at any date
shall have been  reduced,  by  payment,  prepayment,  or  conversion  of portion
thereof,  to be less than  $2,000,000,  such  LIBOR  Loans  shall  automatically
convert  into Base Rate Loans,  and on and after such date the right of Borrower
to  continue  such Loans as, and  convert  such Loans  into,  LIBOR  Loans shall
terminate.

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

                    (a) the proposed conversion date or continuation date;

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

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

                    (d) the  duration of the  requested  Interest  Period in the
case of LIBOR Loans.

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

               2.8.4 Unavailability Of LIBOR Loans. Unless the Requisite Lenders
shall  otherwise  consent,  during  the  existence  of an  Event of  Default  or
Potential Event of Default, Borrower may not elect to have a Loan converted into
or continued as a LIBOR Loan.

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

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

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

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

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

          2.14 Taxes.

               2.14.1 No  Deductions.  Subject  to Section  2.14.7,  any and all
payments by Borrower to each Lender or Agent under this Agreement  shall be made
free and clear of, and without deduction or withholding for, any and all present
or future taxes, levies, imposts, deductions,  charges or withholdings,  and all
liabilities  with  respect  thereto,  excluding,  in the case of each Lender and
Agent,  such taxes (including income taxes or franchise taxes) as are imposed on
or measured by each Lender's net income (all such  non-excluded  taxes,  levies,
imposts,  deductions,  charges,  withholdings and liabilities  being hereinafter
referred to as "Taxes").

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

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

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

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

                    (b) Borrower shall make such deductions; and

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

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

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

                    (a) No later than the date upon which such Lender  becomes a
party  hereto  deliver to Borrower  through  Agent two (2) accurate and complete
signed originals of IRS Form W-8ECI or any successor thereto ("Form W-8ECI"), or
two accurate and complete  signed  originals of IRS Form W-8BEN or any successor
thereto ("Form  W-8BEN"),  as  appropriate,  in each case  indicating  that such
Lender is on the date of  delivery  thereof  entitled  to  receive  payments  of
principal,  interest  and fees under this  Agreement  free from  withholding  of
United States Federal income tax;

                    (b)  If  at  any  time  such   Lender   makes  any   changes
necessitating  a new Form  W-8ECI or Form  W-8BEN,  with  reasonable  promptness
deliver to Borrower  through  Agent in  replacement  for, or in addition to, the
forms  previously  delivered by it hereunder,  two accurate and complete  signed
originals of Form W-8ECI;  or two accurate and complete signed originals of Form
W-8BEN,  as appropriate,  in each case indicating that the Lender is on the date
of delivery thereof entitled to receive payments of principal, interest and fees
under this Agreement free from withholding of United States Federal income tax;

                    (c) Before or  promptly  after the  occurrence  of any event
(including  the passing of time but excluding any event  mentioned in (b) above)
requiring  a change in or renewal of the most  recent Form W-8ECI or Form W-8BEN
previously  delivered  by such  Lender,  deliver to Borrower  through  Agent two
accurate and complete  original  signed  copies of Form W-8ECI or Form W-8BEN in
replacement for the forms previously delivered by the Lender; and

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

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

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

                    (b) If such Lender  shall have  delivered to Borrower a Form
W-8ECI in respect of such  Lending  Office  pursuant to Section  2.14.6 and such
Lender  shall  not at any  time be  entitled  to  exemption  from  deduction  or
withholding  of United  States  Federal  income tax in respect  of  payments  by
Borrower  hereunder for the account of such Lending  Office for any reason other
than  a  change  in  United  States  law  or  regulations  or  in  the  official
interpretation of such law or regulations by any Governmental  Authority charged
with the  interpretation  or  administration  thereof (whether or not having the
force of law) after the date of delivery of such Form W-8ECI; or

                    (c) If such Lender  shall have  delivered to Borrower a Form
W-8BEN in respect of such Lending Office  pursuant to Section  2.14.6,  and such
Lender  shall  not at any  time be  entitled  to  exemption  from  deduction  or
withholding  of United  States  Federal  income tax in respect  of  payments  by
Borrower  hereunder for the account of such Lending  Office for any reason other
than a change in United States law or  regulations  or any applicable tax treaty
or  regulations  or in the official  interpretation  of any such law,  treaty or
regulations by any Governmental  Authority  charged with the  interpretation  or
administration  thereof  (whether or not having the force of law) after the date
of delivery of such Form W-8BEN.

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

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

          2.15 Illegality.

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

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

               2.15.3 Base Rate Borrowing. If Borrower is required to prepay any
LIBOR Loan  immediately as provided in Section 2.15.2,  then  concurrently  with
such prepayment,  Borrower may borrow, in the amount of such prepayment,  a Base
Rate Loan.

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

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

          2.18 Prepayment Penalties.

               2.18.1  Prepayment  of LIBOR Loans.  Borrower  agrees that in the
event  that  Borrower  prepays  or is  required  to  prepay  any  LIBOR  Loan by
acceleration or otherwise or fails to draw down or convert to a LIBOR Loan after
giving notice thereof, it shall reimburse each Lender for its funding losses due
to such  prepayment or failure to draw.  Borrower and Lenders  hereby agree that
such  funding  losses  shall  consist  of  the  sum of  the  discounted  monthly
differences for each month during the applicable or requested  Interest  Period,
calculated as follows for each such month:

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

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

               2.18.2  Prepayment of Cost of Funds Rate Loans.  Borrower  agrees
that in the event that Borrower  prepays or is required to prepay in whole or in
part any Cost of Funds  Rate  Loans,  by  acceleration  or  otherwise,  it shall
reimburse each Lender in an amount equal to the Prepayment Premium applicable to
such Loans,  according to such Lender's Pro Rata Share of the Cost of Funds Rate
Loans being prepaid, excluding any portion attributable to profit.

SECTION 3. CONDITIONS PRECEDENT TO THE MAKING OF LOANS.

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

          3.1.1 Partnership,  Company And Corporate Documents.  Agent shall have
received,  in form and substance  satisfactory  to Lenders and their  respective
counsel, the following:

               (a) A certified  copy of the records of all actions taken by each
Loan Party,  including all  resolutions  of Borrower and  resolutions of FSI and
each other  corporate  Loan Party,  authorizing  or  relating to the  execution,
delivery and  performance of this Agreement and the other Loan Documents and the
consummation of the transactions contemplated hereby and thereby;

               (b) A certificate  of a  Responsible  Officer of each Loan Party,
stating that (A) the articles or certificate of  incorporation,  as the case may
be, bylaws and any other formation documents of each Loan Party attached to such
certificate are true and accurate,  remain in full force and effect and have not
been amended  since the date thereof and (B) each Loan Party is in good standing
under the laws of the state of its formation and each other  jurisdiction  where
its  ownership  of  Property  and  assets or conduct of  business  require  such
qualification;

               (c)  Certificates of incumbency and signature with respect to the
authorized  representatives  of each Loan Party executing this Agreement and the
other Loan Documents and requesting Loans; and

               (d) Such other  documents  relating to each Loan Party as Lenders
may reasonably request.

          3.1.2 Notes.  Agent shall have received  Notes,  in form and substance
satisfactory to Lenders, and duly executed and delivered by Borrower.

          3.1.3  Termination of Existing Note  Agreement;  Repayment of Existing
Notes.  Borrower shall,  concurrently  with the initial  Advance,  terminate the
Existing Note Agreement and repay the Existing  Notes and all other  obligations
outstanding thereunder,  and Agent shall have received from Borrower evidence of
such  termination and repayment,  satisfactory to Agent in its sole and absolute
discretion.

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

          3.1.5   Subordination   Agreement.   Agent  shall  have  received  the
Subordination  Agreement in form and  substance  satisfactory  to Lenders,  duly
executed and delivered by each Subordinated Lender and Borrower.

          3.1.6 Bringdown  Certificate.  A certificate,  dated as of the initial
Funding Date,  of (a) a Responsible  Officer of FSI, in its capacity as the sole
general  partner  of  Borrower,  and  (b) a  Responsible  Officer  of FSI in its
individual  capacity and of each of the other Loan  Parties,  each to the effect
that (i) the  representations  and warranties of Borrower contained in Section 4
of this Agreement and of each Loan Party in each of the other Loan Documents are
true,  accurate and complete in all material  respects as of the initial Funding
Date as though made on such date and (ii) no Event of Default or Potential Event
of Default under this Agreement has occurred.

          3.1.7  Material  Adverse  Effect.  No event that has resulted or could
result in a Material  Adverse  Effect shall have  occurred  since  September 30,
2001, as determined by Agent in its sole discretion.

          3.1.8  Security  Documents.  Agent shall have  received  the  Security
Agreement  in form and  substance  satisfactory  to Agent and duly  executed and
delivered  by  Borrower;   there  shall  have  been  filed  in  all   applicable
jurisdictions  Uniform  Commercial Code financing  statements naming Borrower as
"debtor" and the Agent as "secured party" (which  financing  statements shall be
in form and substance  acceptable to Agent) to perfect the security  interest of
Agent in the  Collateral;  Borrower shall have assigned to Agent any UCC filings
made by Borrower,  any Special Purpose Entity,  or any Owner Trustee against any
lessee  with  respect  to any  item  of  Collateral  described  in the  Security
Agreement;  there shall have been  delivered to Agent or executed,  filed and/or
recorded in all applicable  jurisdictions such other instruments or documents as
Agent deems  necessary  or  advisable  to perfect its  security  interest in any
Collateral other than Trailers, Aircraft, Aircraft engines, Railcars, and marine
vessels;  and  Agent  shall  have  received  such  Lien and  judgment  searches,
opinions, releases,  termination statements, and other documents and instruments
as Agent  shall  reasonably  request  to confirm  that Agent  shall have a first
priority  perfected  security  interest in any  Collateral  other than Trailers,
Aircraft,  Aircraft engines,  Railcars, and marine vessels,  subject to no other
Liens other than Permitted Liens.

          3.1.9 Payment of Fees.  Agent shall have received  evidence of payment
by Borrower of all accrued  and unpaid  fees,  costs and  expenses to the extent
then due and payable on the initial  Funding Date,  together with all reasonable
attorney's fees.

          3.1.10 First Amendment to Warehousing  Credit  Agreement.  Agent shall
have received the First Amendment to Warehousing Credit Agreement, duly executed
and delivered by each party thereto and the same shall have become effective.

          3.1.11 Second Amendment to Limited Partnership Agreement.  Agent shall
have received the Second Amendment to Limited Partnership  Agreement in form and
substance reasonably  satisfactory to Agent, duly executed and delivered and the
same shall have become effective.

          3.1.12 Due  Diligence.  Agent  shall  have  completed,  at  Borrower's
expense,  an  audit  of  Borrower's  Equipment,  Leases,  accounts  receivables,
accounts  payables,  assets,  records,  financial  condition  and  corporate and
financial documents, with results satisfactory to Agent in its sole and absolute
discretion.

          3.1.13  Other   Documents.   Agent  shall  have  received  such  other
documents, information and items from Borrower as reasonably requested by Agent.

     3.2  Conditions  to Each  Advance.  Unless  waived in writing by  Requisite
Lenders, the obligation of any Lender to make any Advance (including the initial
Advance) is subject to the  satisfaction  of the  following  further  conditions
precedent:

          3.2.1 Notice Of  Borrowing;  Certificates.  At least five (5) Business
Days  before each Loan  hereunder,  Agent  shall have  received  (a) a Notice of
Borrowing,  (b) an Asset  Coverage  Ratio  Compliance  Certificate  and,  (c) an
Equipment Schedule,  each with appropriate  insertions  satisfactory to Agent in
its sole and absolute  discretion  and  certified  and executed by a Responsible
Officer of Borrower.

          3.2.2  No Event  Of  Default.  No event  shall  have  occurred  and be
continuing  or would  result  from the making of any Loan on such  Funding  Date
which  constitutes an Event of Default or Potential  Event of Default under this
Agreement.

          3.2.3 Officer's Certificate.  Agent shall have received a certificate,
dated as of the Funding Date,  of a Responsible  Officer of FSI, in its capacity
as the sole general  partner of Borrower and in its  individual  capacity and of
each other Loan Party, certifying to the effect that (i) all representations and
warranties of each Loan Party contained in the Loan Documents are true, accurate
and  complete  in all  material  respects  with the same  effect as though  such
representations  and  warranties  had been made on and as of such  Funding  Date
(except to the extent such representations and warranties specifically relate to
an earlier date, in which case they shall be true,  accurate and complete in all
material  respects  as of such  earlier  date) and (ii) no Event of  Default  or
Potential Event of Default under this Agreement has occurred.

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

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

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

          3.3.1 Partnership,  Company And Corporate Documents.  Agent shall have
received,  in form and substance  satisfactory  to Lenders and their  respective
counsel, the following:

               (a) A  certified  copy of the  records  of all  actions  taken by
Borrower and Aircraft Owner Trustee,  including all  resolutions of Borrower and
resolutions of Aircraft Owner Trustee, authorizing or relating to the execution,
delivery and  performance of the Loan Documents  being  delivered on the Funding
Date of the second Advance and the consummation of the transactions contemplated
thereby;

               (b) A  certificate  of a  Responsible  Officer  of  Borrower  and
Aircraft  Owner  Trustee,  stating  that  (A) the  articles  or  certificate  of
incorporation,  as the case may be, bylaws and any other formation  documents of
each such Loan Party have not been  amended  since the date thereof and (B) each
such Loan Party is in good standing under the laws of the state of its formation
and each  other  jurisdiction  where its  ownership  of  Property  and assets or
conduct of business require such qualification;

               (c)  Certificates of incumbency and signature with respect to the
authorized   representatives  of  each  such  Loan  Party  executing  such  Loan
Documents; and

               (d) Such  other  documents  relating  to each such Loan  Party as
Lenders may reasonably request.

          3.3.2  Opinion Of  Company  Counsel.  Agent  shall  have  received  an
originally  executed legal opinion of Borrower's  counsel, in form and substance
satisfactory  to Agent  and  Lenders,  regarding  the  execution,  delivery  and
performance  of the Loan  Documents  being  delivered on the Funding Date of the
second Advance and the  consummation of the transactions  contemplated  thereby,
dated as of the Funding  Date of the second  Advance and  addressed to Agent and
Lenders,  together with copies of any officer's  certificate or legal opinion of
other counsel or law firm  specifically  identified and expressly relied upon by
such counsel.

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

          3.3.4  Security  Documents.  Agent shall have  received the Pledge and
Security  Agreement  and the  Aircraft  Security  Agreement,  each  in form  and
substance  satisfactory to Agent and duly executed and delivered by Borrower and
the Aircraft  Owner Trustee,  as applicable;  there shall have been filed in all
applicable jurisdictions (a) Uniform Commercial Code financing statements naming
Borrower  and the Aircraft  Owner  Trustee as "debtor" and the Agent as "secured
party" (which financing  statements shall be in form and substance acceptable to
Agent) to perfect the security interest of Agent in the Aircraft  Collateral and
in  Borrower's  beneficial  interest in the Aircraft  Owner  Trust,  and (b) all
documents  and  supplements  required  to be filed by the terms of the  Aircraft
Security  Agreement;  Borrower  shall have assigned,  and caused  Aircraft Owner
Trustee to assign, to Agent, any UCC or FAA filings made by Borrower or Aircraft
Owner Trustee against Aircraft Lessee with respect to the Aircraft Collateral or
Borrower's  beneficial  interest in the Aircraft  Owner Trust;  there shall have
been  delivered to Agent or executed,  filed and/or  recorded in all  applicable
jurisdictions  such other  instruments or documents as Agent deems  necessary or
advisable to perfect its security  interest in the  Aircraft  Collateral  and in
Borrower's beneficial interest in the Aircraft Owner Trust; and Agent shall have
received  such  Lien and  judgment  searches,  opinions,  releases,  termination
statements,  and other  documents  and  instruments  as Agent  shall  reasonably
request to confirm  that Agent shall have a first  priority  perfected  security
interest in the Aircraft Collateral and in Borrower's beneficial interest in the
Aircraft Owner Trust, subject to no other Liens other than Permitted Liens.

          3.3.5 Consent and Agreement. Agent shall have received the Consent and
Agreement, in form and substance satisfactory to Agent and duly executed by each
of Borrower,  Aircraft Owner Trustee,  Aircraft Lessee and American, in favor of
Agent on behalf of Lenders.

          3.3.6 Collateral Documents.  Agent shall have received (i) an executed
copy of the Aircraft Owner Trust  Agreement,  (ii) the chattel paper original of
the  Aircraft  Lease  Agreement,  and  (iii)  an  executed  copy  of each of the
following:  (a) American Guaranty,  dated April 9, 2001, executed by American in
favor of the Aircraft Owner Trustee and Borrower, (b) Assignment, Assumption and
Amendment  Agreement,  dated as of  April  9,  2001,  between  Aircraft  Lessee,
American,  Aircraft Owner Trustee, Borrower, and Trans World Airlines, Inc., (c)
the Assumption and Lease Agreement,  dated as of February 27, 2001,  between the
Aircraft  Owner  Trustee,  Borrower,  and American,  (d) Lessee  Assignment  and
Assumption  Agreement,  dated as of April 9, 2001, between American and Aircraft
Lessee,  (e) Amendment to Lease  Agreement,  dated as of April 9, 2001,  between
Trans World Airlines,  Inc. and the Aircraft Owner Trustee, and (f) Amendment to
Assumption  and Lease  Agreement,  dated as of November 13, 2001 among  Aircraft
Lessee,  American,  Aircraft  Owner  Trustee  and  Borrower  (collectively,  the
"Aircraft  Lease  Documents"),  and any other  related  document  or  agreement,
together  with any and all  amendments  thereto,  in each  case  certified  by a
Responsible  Officer of Borrower and the Aircraft  Owner  Trustee to be true and
complete copy thereof.

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

          3.4.1 General  Partner;  Manager.  (a) FSI shall have ceased to be the
sole general  partner of Borrower,  whether due to the voluntary or  involuntary
withdrawal,  substitution,  removal  or  transfer  of FSI  from or of all or any
portion  of FSI's  general  partnership  interest  or  capital  contribution  in
Borrower or shall have ceased to maintain at least a five percent (5%) ownership
interest in the net  distributions of Borrower or (b) IMI or an Affiliate of IMI
shall have ceased to be the Equipment Manager of Borrower.

          3.4.2 Removal Of General Partner . Twenty five percent (25.0%) or more
of the limited  partners  (measured by such  partners'  percentage  interest) of
Borrower  shall  at any  time  vote to  remove  FSI as the  general  partner  of
Borrower, regardless of whether FSI is actually removed.

     3.5 Satisfaction of Closing  Conditions.  Anything  contained herein to the
contrary notwithstanding,  the obligation of the Lenders to make Loans hereunder
shall not become  effective  unless each of the conditions set forth in Sections
3.1, 3.2 and 3.4 is satisfied  (or waived  pursuant to Section 11.6) at or prior
to 5:00 p.m.,  San  Francisco  time,  on January 31, 2002 (and in the event such
conditions are not so satisfied or waived,  the  Commitments  shall terminate at
such time).

SECTION 4. BORROWER'S  REPRESENTATIONS AND WARRANTIES.  Borrower hereby warrants
and represents to Agent and each Lender as follows, and agrees that each of said
warranties and representations  shall be true and correct as of the Closing Date
and each Funding Date:

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

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

     4.3 No Conflict; Legal Compliance. The execution,  delivery and performance
of this Agreement and each of the other Loan Documents, the execution,  delivery
and payment of the Notes,  the  incurrence of  Indebtedness  hereunder,  and the
granting of the Liens in the Collateral by Borrower or any other Loan Party will
not:  (a)  (i)  contravene  any  provision  of  Borrower's  Limited  Partnership
Agreement,  or other formation or organization  document; or (ii) contravene any
provision of any other Loan Party's  certificate of  incorporation  or bylaws or
other  formation  or  organization  document,  as  applicable;  (b)  contravene,
conflict with or violate any applicable law or regulation,  or any order,  writ,
judgment,  injunction,  decree,  determination  or  award  of  any  Governmental
Authority,  which contravention,  conflict or violation,  in the aggregate,  may
have a Material  Adverse  Effect;  or (c) violate or result in the breach of, or
constitute a default under any indenture or other loan or credit  agreement,  or
other agreement or instrument which are, in the aggregate, material and to which
Borrower  or any other Loan Party is a party or by which  Borrower  or any other
Loan Party's Property and assets may be bound or affected.  Neither Borrower nor
any other Loan  Party is in  violation  or breach of or  default  under any law,
rule, regulation,  order, writ, judgment,  injunction,  decree, determination or
award or any contract,  agreement, lease, license, indenture or other instrument
to which any one of them is a party, the  non-compliance  with, the violation or
breach of or the default under which would, with reasonable  likelihood,  have a
Material Adverse Effect.

     4.4  Financial  Condition.   Borrower's  audited   consolidated   financial
statements as of June 30, 2001 and unaudited  consolidated  financial statements
as of September  30, 2001,  copies of which  heretofore  have been  delivered to
Agent by Borrower,  and all other financial  statements and other data submitted
in writing by Borrower to Agent or any Lender in connection with the request for
credit  granted  by this  Agreement,  are true,  accurate  and  complete  in all
material respects,  and said financial  statements and other data fairly present
the consolidated  financial condition of Borrower,  as of the date thereof,  and
have been prepared in accordance  with GAAP,  subject to fiscal  year-end  audit
adjustments.  There  has  been  no  material  adverse  change  in the  business,
properties or assets, operations, prospects, profitability or financial or other
condition of Borrower since September 30, 2001.

     4.5 Executive  Offices.  The current location of Borrower's and FSI's chief
executive offices and principal places of business is set forth on Schedule 4.5.

     4.6  Litigation.  Except as disclosed on Schedule 4.6, there are no claims,
actions,  suits,  proceedings  or other  litigation  pending  or, to the best of
Borrower's knowledge, after due inquiry, threatened against Borrower, FSI or any
of FSI's Subsidiaries, at law or in equity before any Governmental Authority or,
to the best of Borrower's knowledge, after due inquiry, any investigation by any
Governmental  Authority  of  Borrower's  or FSI's or any of FSI's  Subsidiaries'
affairs,  Properties  or assets  which would,  with  reasonable  likelihood,  if
adversely  determined,  have a Material Adverse Effect. Other than any liability
incident to the  litigation or proceedings  disclosed on Schedule 4.6,  Borrower
does not have any Contingent Obligations which are not provided for or disclosed
in the financial statements delivered to Agent pursuant to Sections 4.4 and 5.1.
There are no appeals to the Settlement Order currently filed or pending with any
Governmental Authority.

     4.7 Material  Contracts.  Schedule 4.7 lists all currently  effective  loan
agreements and other contracts and agreements (whether written or oral) to which
Borrower is a party (other than Leases) and which (i) could  involve the payment
by  Borrower  after  the date of this  Agreement  of more than  $250,000  in the
aggregate  or (ii)  otherwise  materially  affect the  business,  operations  or
financial condition of Borrower (the "Material Contracts").  Except as disclosed
on Schedule 4.7, there are no material defaults under any such Material Contract
by Borrower, to the best of Borrower's knowledge, by any other party to any such
Material  Contract.  Borrower has delivered to Agent true and correct  copies of
all such  contracts  or  agreements  (or,  with  respect  to oral  contracts  or
agreements, written descriptions of the material terms thereof).

     4.8 Consents And Approvals.  No approval,  authorization  or consent of any
trustee or holder of any  indebtedness or obligation of Borrower or of any other
Person under any such material agreement,  contract, lease or license or similar
document or  instrument  to which  Borrower  is a party or by which  Borrower is
bound, is required to be obtained by Borrower in order to make or consummate the
transactions  contemplated  under  the Loan  Documents.  Except  as set forth in
Schedule 4.8, all consents and approvals of, filings and registrations with, and
other  actions  in respect  of,  all  Governmental  Authorities  required  to be
obtained by Borrower or any other Loan Party in order to make or consummate  the
transactions  contemplated  under the Loan  Documents have been, or prior to the
time when required will have been,  obtained,  given,  filed or taken and are or
will be in full force and effect.

     4.9 Other Agreements.  Neither Borrower nor any other Loan Party is a party
to or is bound by any agreement,  contract,  lease, license or instrument, or is
subject to any restriction under its respective charter or formation  documents,
which has, or is likely in the  foreseeable  future to have, a Material  Adverse
Effect.  Neither  Borrower nor FSI has entered  into,  and does not  contemplate
entering into, any material agreement or contract with any Affiliate of Borrower
or FSI on terms that are less favorable to Borrower or FSI than those that might
be obtained at the time from Persons who are not such Affiliates.

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

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

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

     4.13 Margin  Regulations.  Borrower does not own any "margin security",  as
that term is defined in  Regulation  U of the  Federal  Reserve  Board,  and the
proceeds of the Loans under this  Agreement  will be used only for the  purposes
set  forth  in  Section  2.1.3.  None of the  Loans  will be used,  directly  or
indirectly,  for the purpose of purchasing or carrying any margin security,  for
the  purpose of  reducing  or retiring  any  indebtedness  which was  originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this  Agreement  to be  considered a "purpose
credit"  within the meaning of Regulations T, U and X. Borrower will not take or
permit  FSI or any agent  acting on its behalf to take any  action  which  might
cause this Agreement or any document or instrument  delivered pursuant hereto to
violate any regulation of the Federal Reserve Board.

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

     4.15 Environmental Quality.

          (a) Except as  specifically  disclosed in Schedule  4.15, the on-going
operations  of  Borrower,  FSI and each of  FSI's  Subsidiaries,  comply  in all
material respects with all Environmental Laws, except such non-compliance  which
would not (if enforced in accordance with applicable law) result in liability in
excess of $250,000 in the aggregate.

          (b) Except as specifically  disclosed in Schedule 4.15, Borrower,  FSI
and  each  of  FSI's   Subsidiaries   has   obtained  all   licenses,   permits,
authorizations   and   registrations   required  under  any   Environmental  Law
("Environmental Permits") and necessary for its ordinary course operations,  all
such Environmental Permits are in good standing,  and Borrower,  FSI and each of
FSI's  Subsidiaries  is in compliance  with all material terms and conditions of
such Environmental Permits.

          (c)  Except  as  specifically  disclosed  in  Schedule  4.15,  neither
Borrower  nor FSI nor  any of  FSI's  Subsidiaries  or any of  their  respective
present Property or operations is subject to any outstanding  written order from
or  agreement  with any  Governmental  Authority  nor subject to any judicial or
docketed   administrative   proceeding,   respecting  any   Environmental   Law,
Environmental Claim or Hazardous Material.

          (d) Except as  specifically  disclosed in Schedule 4.15,  there are no
Hazardous  Materials or other conditions or circumstances  existing with respect
to any  Property,  or arising  from  operations  prior to the Closing  Date,  of
Borrower,  FSI or any of FSI's Subsidiaries that would reasonably be expected to
give rise to Environmental Claims with a potential liability of Borrower, FSI or
any of FSI's  Subsidiaries  in excess of $250,000 in the  aggregate for any such
condition, circumstance or Property.

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

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

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

     4.19 Solvency. Each of Borrower and FSI is Solvent.

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

SECTION 5. BORROWER'S AFFIRMATIVE COVENANTS.

     Borrower covenants and agrees that, so long as any of the Commitments shall
be available and until full,  complete and indefeasible  payment and performance
of the Obligations, unless Requisite Lenders shall otherwise consent in writing,
Borrower shall do or cause to have done all of the following:

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

          5.1.1 Quarterly Statements.  Within forty-five (45) days after the end
of each quarterly accounting period of Borrower and PLMI, except with respect to
the final fiscal  quarter of each fiscal year,  consolidated  balance  sheets of
PLMI and  Borrower  as at the end of such  period and the  related  consolidated
statements  of  income,  stockholders'  or  partners'  equity  and cash flows of
Borrower and PLMI for such quarterly  accounting  period,  setting forth in each
case in comparative form the consolidated figures for the corresponding  periods
of the previous  year,  all in reasonable  detail and certified by a Responsible
Officer of Borrower and PLMI that they (i) are  complete and fairly  present the
financial  condition  of  Borrower  and PLMI as at the dates  indicated  and the
results of their  operations  and  changes  in their  cash flow for the  periods
indicated,  (ii) disclose all liabilities of Borrower and PLMI that are required
to  be  reflected  or  reserved  against  under  GAAP,   whether  liquidated  or
unliquidated,  fixed or  contingent  and (iii) have been  prepared in accordance
with  GAAP,  subject  to  changes  resulting  from  audit  and  normal  year-end
adjustment;

          5.1.2 Annual Statements. Within ninety (90) days after the end of each
fiscal year of each of Borrower and PLMI,  consolidated  balance  sheets of PLMI
and a consolidated  balance sheet of Borrower as at the end of such year and the
related consolidated statements of income, stockholders' or partners' equity and
cash flows of Borrower,  if applicable,  and PLMI for such fiscal year,  setting
forth in each  case,  in  comparative  form  the  consolidated  figures  for the
previous year, all in reasonable detail and (i) in the case of such consolidated
financial  statements,  accompanied by a report thereon of an independent public
accountant of  recognized  national  standing  selected by Borrower and PLMI and
satisfactory  to Agent,  which  report  shall  contain an  opinion  which is not
qualified in any manner or which otherwise is satisfactory to Requisite Lenders,
in their sole discretion,  and (ii) in the case of such consolidating  financial
statements, certified by a Responsible Officer of PLMI;

          5.1.3  Equipment  Schedule.  Within  twenty (20) days after the end of
each  calendar  month,  an Equipment  Schedule  dated as of the last day of such
month, duly executed by FSI as the sole general partner of Borrower;

          5.1.4 Asset Coverage Ratio Compliance Certificate.  Within twenty (20)
days after the end of each calendar  month,  an Asset Coverage Ratio  Compliance
Certificate  dated as of the last day of such month, duly executed by FSI as the
sole general partner of Borrower;

          5.1.5 Compliance  Certificate.  Within  forty-five (45) days after the
end of each fiscal quarter of Borrower,  except with respect to the final fiscal
quarter of each fiscal year, in which case within ninety (90) days after the end
of such fiscal  quarter,  a Compliance  Certificate  dated as of the last day of
such fiscal  quarter,  and executed by a Responsible  Officer of Borrower,  with
appropriate insertions;

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

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

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

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

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

          5.1.11 Pension Plans.  Promptly upon receipt by Borrower or any of its
ERISA Affiliates,  any challenge by the IRS to the  qualification  under Section
401 or 501 of the Code of any Pension Plan;

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

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

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

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

     5.2  Appraisals.  Agent shall have the right on an annual basis (and upon a
more frequent basis upon reasonable  request) to require that, at the expense of
Borrower, an appraisal be made by an Approved Appraiser of the Fair Market Value
of the Eligible Inventory;  provided, however, that Borrower shall not be liable
for the costs of more than one such  appraisal in any calendar  year,  unless an
Event of Default has occurred and is  continuing.  Borrower shall make available
to any Approved Appraiser who so requests all information regarding the Eligible
Inventory  reasonably  requested by such Approved  Appraiser and shall otherwise
cooperate  fully with Agent and such Approved  Appraiser in connection  with any
such appraisal.

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

     5.4 Insurance. Borrower shall maintain and keep in force, and cause FSI and
each of FSI's Subsidiaries to maintain and keep in force, insurance of the types
and in amounts then customarily  carried in lines of business similar to that of
Borrower,  FSI or any of FSI's  Subsidiaries as the case may be, including,  but
not limited to, fire,  extended  coverage,  public  liability,  property damage,
environmental  hazard  and  workers'  compensation,  in each case  carried  with
financially  sound  Persons and in amounts  satisfactory  to  Requisite  Lenders
(subject to commercial  reasonableness as to each type of insurance);  provided,
however,  that the types and  amounts of  insurance  shall not  provide any less
coverage  for  Borrower  than  provided as of the Closing  Date by the  existing
blanket  policies of insurance  for PLMI and its  Subsidiaries.  All policies of
property insurance shall carry endorsements naming Agent as principal loss payee
as to any property owned by Borrower and financed by Lenders and all policies of
liability  insurance shall carry endorsements naming Agent and each Lender as an
additional  insured,  and in each case  indicating  that (a) any loss thereunder
shall be payable to Agent or Lenders,  as the case may be,  notwithstanding  any
action, inaction or breach of representation or warranty by Borrower or FSI; (b)
there shall be no  recourse  against any Lender for payment of premiums or other
amounts with respect thereto,  and (c) at least fifteen (15) days' prior written
notice of  cancellation,  lapse or material change in coverage shall be given to
Agent by the insurer.

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

     5.6 Inspection Rights;  Assistance. At any reasonable time and from time to
time during  normal  business  hours,  permit  Agent or any Lender or any agent,
representative or employee thereof,  to examine and make copies of and abstracts
from the financial records and books of account of Borrower, FSI or any of FSI's
Subsidiaries,  and other  documents  in the  possession  or under the control of
Borrower, FSI or any of FSI's Subsidiaries, including relating to any obligation
of Borrower  arising under or  contemplated  by this  Agreement and to visit the
offices of Borrower to discuss the  affairs,  finances  and accounts of Borrower
with any of the officers of Borrower,  and,  upon  reasonable  notice and during
normal  business hours (unless an Event of Default or Potential Event of Default
shall have occurred and be continuing, in which event no notice is required), to
conduct audits of and appraise the Equipment.  Such audits and appraisals  shall
be  subject  to the  lessee's  right  to  quiet  enjoyment  as set  forth in the
respective Lease.

     5.7 Maintenance Of Facilities; Modifications; Performance of Leases.

          5.7.1  Maintenance Of  Facilities.  Borrower shall keep, and cause FSI
and each of FSI's Subsidiaries to keep, all of their respective Properties which
are useful or necessary to Borrower's,  FSI's or such Subsidiary's  business, in
good repair and condition,  normal wear and tear excepted, and from time to time
make, and cause each such  Subsidiary to make  necessary  repairs  thereto,  and
renewals and replacements thereof so that Borrower's, FSI's or such Subsidiary's
Properties shall be fully and efficiently preserved and maintained.

          5.7.2  Certain  Modifications  To The  Equipment.  Subject  to Section
5.7.1,  Borrower shall  promptly  make, or cause to be made, all  modifications,
additions and adjustments to the Eligible  Inventory as may from time to time be
required by any Governmental  Authority having  jurisdiction over the operation,
safety or use thereof.

          5.7.3  Performance  of Leases.  Borrower  shall timely  perform in all
material  respects  each of its covenants  and  obligations  under the Leases to
which it is a party.

     5.8  Special  Provisions  for  Aircraft.  Without  limiting  the  foregoing
provisions of Section 5.4 and 5.7, Borrower shall cause any Aircraft owned by it
or in which  it has an  ownership  interest  to be  maintained  and  insured  as
provided in this Section 5.8.

          5.8.1  Maintenance  and  Servicing of Aircraft.  Borrower  will at all
times cause:

               (a)  any  Aircraft  that  is on  lease  and  included  as part of
Eligible Inventory to be serviced, repaired,  maintained,  tested and overhauled
so as to keep such Aircraft in such  operating  condition as may be necessary to
enable the airworthiness  certification of the Aircraft to be maintained in good
standing  at all  times  under  the  Federal  Aviation  Act or the  governmental
authority having jurisdiction over such Aircraft;

               (b)  all  records,  logs  and  other  materials  required  to  be
maintained by the FAA, or the governmental  authority having  jurisdiction  over
any Aircraft,  to be maintained in respect of each Aircraft  (including any item
of Equipment included therein); and

               (c) any  Aircraft  to comply  with all  airworthiness  directives
issued by any governmental authority having jurisdiction over any Aircraft.

          5.8.2 Public  Liability and Property  Damage  Liability  Insurance for
Aircraft.  Borrower  will at all times  cause  third  party  aircraft  liability
insurance,  passenger legal  liability  insurance,  if applicable,  and property
damage liability insurance to be carried with respect to any Aircraft.

          5.8.3 Insurance Against Loss or Damage to the Aircraft. Borrower shall
at all times cause the following to be maintained  with respect to any Aircraft:
(i) all-risk ground and flight aircraft hull insurance covering the airframe and
engines of any such  Aircraft;  (ii) fire,  transit and extended  coverage  with
respect to any engines or parts while removed from such Aircraft;  and (iii) war
risk,  hijacking (air piracy) and governmental  confiscation  and  expropriation
insurance.

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

     5.10 Further Assurances.

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

          5.10.2 Upon any assignment by IMI of its rights and obligations  under
the  Management  Agreements to any Affiliate of IMI,  Borrower  shall cause such
Affiliate to become a party to the  Subordination  Agreement  as a  Subordinated
Lender.

          5.10.3 Without limiting  Section 5.10.1,  promptly upon request by the
Agent or the Requisite  Lenders,  Borrower  shall,  and cause FSI and each Owner
Trustee and each  Special  Purpose  Entity to,  execute,  acknowledge,  deliver,
record,  re-record,  file, re-file,  register and re-register,  any and all such
further acts, deeds, conveyances,  security agreements,  mortgages, assignments,
estoppel   certificates,   financing   statements  and  continuations   thereof,
termination  statements,   notices  of  assignment,   transfers,   certificates,
assurances and other  instruments  the Agent or such Requisite  Lenders,  as the
case may be, may reasonably  require from time to time in order (i) to carry out
more  effectively,  the purposes of this  Agreement or any other Loan  Document,
(ii) to subject to the Liens created by any of the Security Documents any of the
properties,  rights or interests covered by any of the Security Documents, (iii)
to perfect and maintain the validity,  effectiveness  and priority of any of the
Security  Documents and the Liens  intended to be created  thereby,  and (iv) to
better assure, convey, grant, assign, transfer, preserve, protect and confirm to
the Agent and the Lenders the rights granted or now or hereafter  intended to be
granted  to the  Lenders  under any Loan  Document  or under any other  document
executed in connection therewith.  Upon a Potential Event of Default or an Event
of Default,  Borrower hereby authorizes Agent, in such jurisdictions  where such
action  is  authorized  by law,  to effect  any such  recordations,  filings  or
registrations  of  financing  statements  and other  instruments  and  documents
without the signature of Borrower thereto.

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

     5.12  Operating  Relationship.  Borrower  shall maintain all of its primary
depositary  and operating  accounts  with Comerica Bank or Comerica  Securities,
Inc. except for its payroll account. In addition,  Borrower (either individually
or together  with  Acquisub and the  Equipment  Growth  Funds) will  maintain on
deposit with PFF  non-interest  bearing demand deposit balances of not less than
(i) $650,000 for the period  commencing  no later than December 31, 2001 through
and  including  December  31,  2002;  (ii)  3.25% of the sum of:  (x) the  total
"Commitment"  of PFF under the Warehousing  Credit  Agreement on January 1, 2003
and (y) the total  Commitment of PFF under this Facility on January 1, 2003 less
the aggregate  amount of principal  repayments or  prepayments  made by Borrower
during calendar year 2002 on the Loans made by PFF hereunder,  for the six-month
period  commencing on January 1, 2003 through and including June 30, 2003; (iii)
3.25% of the sum of:  (x) the total  "Commitment"  of PFF under the  Warehousing
Credit Agreement on July 1, 2003 and (y) the unpaid principal balance on July 1,
2003 of the Loans made by PFF hereunder,  for the six-month period commencing on
July 1, 2003 through and including  December 31, 2003; and (iv) 3.25% of the sum
of: (x) the total  "Commitment" of PFF under the Warehousing Credit Agreement on
each  January 1  (commencing  on January  1, 2004) and (y) the unpaid  principal
balance on each January 1  (commencing  on January 1, 2004) of the Loans made by
PFF hereunder, for each calendar year thereafter (commencing on January 1, 2004)
through the Termination Date.

     5.13 Lockbox Agreement.  Borrower shall continue to deposit all remittances
made  by  any  obligor  under  any  Lease  to the  Lockbox  (as  defined  in the
Warehousing  Credit Agreement)  pursuant to the Lockbox Agreement (as defined in
the  Warehousing  Credit  Agreement).  In the  event of the  termination  of the
Warehousing Credit Agreement prior to the Termination Date, Borrower shall enter
into an  agreement  with Agent on behalf of the  Lenders  in form and  substance
similar to the Lockbox Agreement.

SECTION 6. BORROWER'S NEGATIVE COVENANTS.

     So long as any of the  Commitments  shall  be  available  and  until  full,
complete and  indefeasible  payment and performance of the  Obligations,  unless
Requisite  Lenders shall otherwise  consent in writing,  Borrower  covenants and
agrees as follows:

          6.1 Liens;  Negative  Pledges;  And  Encumbrances.  Borrower shall not
create,  incur, assume or suffer to exist, nor permit any Special Purpose Entity
or Owner Trustee to create,  incur,  assume or suffer to exist,  any Lien of any
nature upon or with respect to any of their respective Property,  whether now or
hereafter  owned,  leased or  acquired,  except  (collectively,  the  "Permitted
Liens"):

               6.1.1 Liens in favor of  Comerica  Bank,  successor  by merger to
Imperial  Bank,  as Agent on behalf of the lenders  pursuant to the  Warehousing
Credit Agreement;

               6.1.2  Liens  for  Charges  if  payment  shall not at the time be
required to be made in accordance with Section 5.5;

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

               6.1.4 Permitted Rights of Others;

               6.1.5  Liens  granted  in favor of Agent  on  behalf  of  Lenders
pursuant to the Security Documents;

               6.1.6 Liens  incurred by a Special  Purpose Entity to secure debt
allowed to be incurred by such Special Purpose Entity pursuant to Section 6.3.2;

               6.1.7 In the case of the Aircraft Collateral,  Liens permitted by
the terms of Sections 6(i), (ii), (iv), (v), (vi), (vii),  (viii) and (x) of the
Aircraft Lease Agreement as such terms are in effect on the Closing Date;

               6.1.8 In the case of any item of  Equipment  other than  Aircraft
Collateral:  (a) any Liens for current taxes, assessments and other governmental
charges not yet due and payable or being  contested  in good faith by  Borrower,
any Special  Purpose Entity or any Owner Trustee (or by a lessee) by appropriate
proceedings and for which adequate reserves have been established by Borrower as
reflected in Borrower's  financial  statements (or by the lessee as reflected in
such  lessee's  financial   statements);   (b)  any  mechanic's,   materialman's
carrier's,  warehousemen's  or  similar  Liens  for  sums  not yet due or  being
contested in good faith by  Borrower,  any Special  Purpose  Entity or any Owner
Trustee  (or by a lessee)  by  appropriate  proceedings  and for which  adequate
reserves have been established by Borrower as reflected in Borrower's  financial
statements   (or  by  the  lessee  as  reflected  in  such  lessee's   financial
statements);  (c) the rights of a lessee or sublessee  to utilize the  Equipment
pursuant to the terms of a Lease; and (d) Liens arising from the following types
of  liabilities  of a lessee or any other  operator of any  Aircraft or Aircraft
engine,  so  long as  such  liabilities  are  either  not  yet due or are  being
contested in good faith through appropriate proceedings that do not give rise to
any reasonable likelihood of the sale, forfeiture or other loss of such Aircraft
or Aircraft  engines,  title thereto or Agent's security  interest therein or of
criminal or unindemnified  civil liability on the part of Borrower,  any Special
Purpose Entity, any Owner Trustee, or Agent and with respect to which the lessee
maintains adequate reserves (in the reasonable  judgment of Borrower):  (1) fees
or charges of any airport or navigation authority, (2) judgments, or (3) salvage
or other rights of insurers;

               6.1.9  Liens not  exceeding  $100,000  consisting  of judgment or
judicial  attachment liens,  provided that no Event of Default exists in respect
thereof pursuant to Section 8.1.9.

          6.2 Intentionally omitted.

          6.3 Limitations On Indebtedness. Borrower shall neither create, incur,
assume or suffer  to exist,  nor  permit  any  Special  Purpose  Entity or Owner
Trustee  to  create,  incur,  assume or suffer to  exist,  any  Indebtedness  or
Contingent  Obligation;  provided,  however,  that this Section 6.3 shall not be
deemed to prohibit:

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

6.3.2 Indebtedness incurred by a Special Purpose Entity to finance equipment not
constituting Eligible Inventory, provided that such Indebtedness is non-recourse
to Borrower and not guaranteed by Borrower;

               6.3.3  Indebtedness  incurred  by the  Borrower  pursuant  to the
Warehousing Credit Agreement;

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

               6.3.5 The endorsement of negotiable  instruments  received in the
ordinary course of Borrower's business;

               6.3.6  With the prior  written  consent  of  Agent,  Indebtedness
incurred  in  respect of the  deferred  purchase  price for an item of  Eligible
Inventory  to be  financed  with the  proceeds  of a loan under the  Warehousing
Credit  Agreement,   but  only  to  the  extent  that  the  incurrence  of  such
Indebtedness  is customary in the industry  with respect to the purchase of this
type of equipment (provided that such Indebtedness shall only be permitted under
this Section 6.3.6 if, taking into account the incurrence of such  Indebtedness,
Borrower's  incurring such Indebtedness  shall not be in violation of any of the
financial  covenants  set  forth  in  Section  7 if  measured  as of the date of
incurrence as determined by GAAP); and

               6.3.7  Any  Guaranty  Obligations  of  Borrower  in the  form  of
performance  guaranties  undertaken  on behalf of a  Special  Purpose  Entity of
Borrower  in favor of the  charter  party in  connection  with the  leasing of a
marine vessel on a time charter.

          6.4 Use Of  Proceeds.  Borrower  shall not,  nor  permit  any  Special
Purpose  Entity or any Owner Trustee to, use the proceeds of any Loan except for
the purpose set forth in Section 2.1.3.

          6.5 Sale and  Leaseback.  Borrower  shall not,  nor permit any Special
Purpose  Entity or any  Owner  Trustee  to,  enter  into any sale and  leaseback
agreement covering any of its or their respective fixed or capital assets.

          6.6 Restriction On Fundamental Changes. Borrower shall not, nor permit
any  Special  Purpose  Entity  or any  Owner  Trustee  to,  (1)  enter  into any
transaction  of  merger,   consolidation   or   recapitalization,   directly  or
indirectly,  whether by operation of law or otherwise, or liquidate,  wind up or
dissolve itself (or suffer any  liquidation or  dissolution),  or convey,  sell,
lease, assign,  transfer or otherwise dispose of, in one transaction or a series
of transactions, all or any part of its respective business, Property or assets,
whether now owned or hereafter acquired, or (2) acquire by purchase or otherwise
all or substantially all the business,  Property or assets of, or stock or other
evidence of beneficial ownership of, any Person, except (a) for the formation of
Special  Purpose  Entities  and the sale and  transfer  of all of its  ownership
interest  (whether  stock or  otherwise)  in any Special  Purpose  Entity to any
Equipment  Growth Fund,  and (b) the  acquisition  or resale of Equipment in the
ordinary  course of business (for the purposes of this Section 6.6, with respect
to Borrower and any Special  Purpose  Entity,  ordinary course of business shall
refer  to  the   business  of  Borrower  and  all  Special   Purpose   Entities,
collectively).

          6.7 Transactions  With Affiliates.  Borrower shall not, nor permit any
Special  Purpose Entity or any Owner Trustee to,  directly or indirectly,  enter
into or permit to exist any  transaction  (including,  without  limitation,  the
purchase,  sale,  lease or exchange  of any  property  or the  rendering  of any
service) with any of its Affiliates on terms that are less favorable to Borrower
or such Special  Purpose  Entity or such Owner  Trustee than those that might be
obtained at the time from Persons who are not such Affiliates.

          6.8 Intentionally omitted.

          6.9 No  Investment.  Borrower  shall not make or  suffer to exist,  or
permit or suffer any of its Special  Purpose  Entities  or any Owner  Trustee to
make or suffer to exist any Investment,  except for (1) the sharing arrangements
with  respect to  Equipment  which is shared  with  Equipment  Growth  Funds and
equipment  owned  jointly  with  Special  Purpose   Entities,   and  (2)  equity
investments  in Special  Purpose  Entities in an aggregate  amount not to exceed
$6,000,000.

          6.10  Maintenance  Of  Business.  Borrower  shall  not  engage  in any
business inconsistent with the purpose of Borrower and the investment objectives
described in Section 1.05 of the Limited Partnership Agreement,  as in effect on
the Closing Date.

          6.11  Modification  to Aircraft  Lease  Documents.  Borrower shall not
modify or agree to modify  and shall not permit the  Aircraft  Owner  Trustee to
modify or agree to modify , any  material  term of any Aircraft  Lease  Document
without the written  consent of Agent,  which consent shall not be  unreasonably
withheld,  delayed or conditioned.  For purposes of this Section 6.11,  material
terms shall  include , without  limitation,  terms  relating to lease  payments,
maturity and the amount and scope of Aircraft Lessee's insurance coverage.

          6.12 No  Subsidiaries.  Borrower  shall not  create  any  Subsidiaries
except Special Purpose Entities.

          6.13 No  Distributions;  Management  Fees.  Borrower  shall not on any
date,  directly or indirectly,  make, pay or set apart any funds for the payment
or distribution to FSI, the Equipment Manager,  or any of the Borrower's limited
partners,  and shall not redeem any  limited  partnership  units if a  Potential
Event of Default or an Event of Default exists on such date or would result from
such payment,  distribution or redemption,  as applicable.  Without limiting the
generality of the  foregoing,  Borrower shall not directly or indirectly pay any
Subordinated  Incentive  Fee (as defined in the Limited  Partnership  Agreement)
unless and until the payment  and  performance  in full of all the  Obligations.
Notwithstanding anything to the contrary in the foregoing,  Borrower may (1) pay
to FSI  or  the  Equipment  Manager  management  fees  pursuant  to the  Limited
Partnership Agreement or equipment management fees or servicing fees pursuant to
the Management  Agreements,  in each case not in excess of the amounts  provided
for in, and  subject to the terms and  conditions  of, the  Limited  Partnership
Agreement and the  Management  Agreements,  as the case may be, in effect on the
Closing Date, (2) reimburse FSI and its Affiliates for Borrower expenses paid by
them, to the extent  allowed by the Limited  Partnership  Agreement in effect on
the Closing Date, and (3) redeem any limited  partnership  units pursuant to the
terms and conditions set forth in the Settlement Order.

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

          6.15 ERISA. If Borrower,  FSI or any of their ERISA Affiliates  incurs
any  obligation to contribute to any Pension Plan,  then Borrower shall not, nor
permit  FSI to,  either  (a)  terminate,  or  permit  such  ERISA  Affiliate  to
terminate,  any Pension Plan so as to result in any liability  that would,  with
reasonable likelihood, have a Material Adverse Effect or (b) make or permit such
ERISA Affiliate to make a complete or partial  withdrawal (within the meaning of
Section  4201 of  ERISA)  from any  Multiemployer  Plan so as to  result  in any
liability  that  would,  with  reasonable  likelihood,  have a Material  Adverse
Effect.

          6.16 No Use Of Any Lender's Name.  Borrower shall not use or authorize
others  to use  any  Lender's  name  or  marks  in any  publication  or  medium,
including,  without  limitation,  any prospectus,  without such Lender's advance
written authorization except as required by law.

          6.17 Certain Accounting Changes.  Borrower shall not change its fiscal
year end from  December 31 or make any change in its  accounting  treatment  and
reporting practices except as permitted by GAAP; provided,  however, that should
Borrower  change its accounting  treatment or reporting  practices in a way that
would cause a change in the calculation,  or in the results of a calculation, of
any of the  financial  covenants  set forth in Section 7, below,  then  Borrower
shall continue to calculate such  covenants as if such  accounting  treatment or
reporting  practice had not been changed unless otherwise agreed to by Requisite
Lenders.

          6.18  Amendment  Of  Limited  Partnership  Agreement.  Borrower  shall
neither permit nor cause to occur, any amendment,  modification or supplement of
or to  any  of  the  terms  or  provisions  of  Borrower's  Limited  Partnership
Agreement,  which amendment,  modification or supplement would affect,  limit or
otherwise  impair  Borrower's  ability to pay the  Obligations  or  perform  its
obligations under this Agreement or any of the other Loan Documents.

SECTION 7. FINANCIAL COVENANTS OF BORROWER.

     Borrower  covenants and agrees that, so long as the  Commitments  hereunder
shall be  available,  and until  full,  complete  and  indefeasible  payment and
performance  of  the  Obligations,  including,  without  limitation,  all  Loans
evidenced by the Notes,  unless  Requisite  Lenders shall  otherwise  consent in
writing,  Borrower  shall perform the following  financial  covenants.  Borrower
agrees and  understands  that (i) the covenants  under Sections 7.1, 7.2 and 7.3
shall be subject to  quarterly  compliance  (as measured on the last day of each
fiscal  quarter  of  Borrower),  and in  each  case  review  by  Lenders  of the
respective fiscal quarter's consolidated financial statements delivered to Agent
by Borrower  pursuant to Section 5.1, and (ii) the  covenant  under  Section 7.4
shall be subject  to monthly  compliance  (as  measured  on the last day of each
fiscal month of Borrower)  and as of the date of any request for a Loan pursuant
to Section 3.2.1 (after giving effect to the making of such Loan on such date).

     7.1 Minimum Operating Cash Flow Coverage Ratio.  Borrower shall maintain an
Operating Cash Flow Coverage Ratio of not less than 1.25:1.00.

     7.2 Minimum Total Cash Flow Coverage Ratio. Borrower shall maintain a Total
Cash Flow Coverage Ratio of not less than 1.00:1.00.

     7.3 Maximum Leverage Ratio. Borrower shall maintain a Leverage Ratio of not
more than 1.50:1.0.

     7.4 Minimum Asset  Coverage  Ratio.  Borrower  shall maintain the following
Asset Coverage Ratios:

          for the period commencing on the Closing Date until December 31, 2002,
of not less than 2.50:1.00;

          for the period  commencing on January 1, 2003 until December 31, 2003,
of not less than 2.75:1.00; and

          for the period  commencing  on  January 1, 2004 until the  Termination
Date, of not less than 3.00:1.00.

SECTION 8. EVENTS OF DEFAULT AND REMEDIES.

     8.1 Events Of Default.  The  occurrence of any one or more of the following
shall constitute an Event of Default:

          8.1.1 Failure To Make Payments.  Borrower,  any Special Purpose Entity
or any Owner  Trustee fails to pay any sum due to Lenders or Agent arising under
this Agreement, any Note or any of the other Loan Documents when and as the same
shall  become due and payable,  whether by  acceleration  or otherwise  and such
failure  shall not have been  cured to  Lenders'  satisfaction  within  five (5)
calendar days; or

          8.1.2 Other Agreements.  Borrower,  any Special Purpose Entity, or any
Owner  Trustee  defaults in the  repayment of any principal of or the payment of
any interest on any  Indebtedness  of Borrower,  any such Special Purpose Entity
(other than  Indebtedness of any such Special Purpose Entity without recourse to
and not  guaranteed  by Borrower) or any such Owner  Trustee,  respectively,  or
defaults in any payment in respect of any  Contingent  Obligation  (other than a
Contingent  Obligation  without recourse to and not guaranteed by Borrower),  in
each case exceeding, in the aggregate outstanding principal amount,  $2,000,000,
or  Borrower,  any  Special  Purpose  Entity or any Owner  Trustee  breaches  or
violates  any  term  or  provision  of any  evidence  of  such  Indebtedness  or
Contingent  Obligation  or of any  such  loan  agreement,  mortgage,  indenture,
guaranty or other agreement  relating thereto if the effect of such breach is to
permit acceleration under the applicable instrument,  loan agreement,  mortgage,
indenture,  guaranty or other  agreement  and such  failure  shall not have been
cured within the applicable cure period,  or there is an acceleration  under the
applicable instrument, loan agreement,  mortgage,  indenture,  guaranty or other
agreement; or

          8.1.3 Breach Of Covenants. Borrower fails or neglects to perform, keep
or observe any of the covenants  contained in Sections  2.1.3,  5.3, 5.4,  5.10,
5.13, 6.1, 6.3, 6.4, 6.5, 6.6, 6.7, 6.9, 6.10,  6.11,  6.12, 6.13, 6.17 or 6.18,
or any of the financial covenants contained in Section 7 of this Agreement; or

          8.1.4 Breach Of Representations  Or Warranties.  Any representation or
warranty  made by or on  behalf of  Borrower  or any  other  Loan  Party in this
Agreement or any other Loan Document or any statement or certificate at any time
given in  writing  pursuant  hereto or in  connection  herewith  shall be false,
misleading or incomplete in any material respect when made; or

          8.1.5 Failure To Cure. Except as provided in Sections 8.1.1 and 8.1.3,
Borrower,  any Special  Purpose Entity or any Owner Trustee fails or neglects to
perform,  keep or observe any covenant or provision of this  Agreement or of any
of the other Loan  Documents  or any other  document  or  agreement  executed by
Borrower,  any  such  Special  Purpose  Entity  or any  such  Owner  Trustee  in
connection  therewith,  and the same has not been  cured to  Requisite  Lenders'
satisfaction  within thirty (30) calendar days from the earlier of the date: (x)
a Responsible  Officer of Borrower,  such Special  Purpose  Entity or such Owner
Trustee  first  becomes  aware  thereof or (y) Agent or any Lender  gives notice
thereof to Borrower, such Special Purpose Entity or such Owner Trustee; or

          8.1.6  Insolvency.  Borrower,  any  Special  Purpose  Entity  that has
incurred any Indebtedness  with recourse to, or guaranteed by, Borrower,  or any
Owner Trustee shall (a) cease to be Solvent,  (b) admit in writing its inability
to pay its debts as they  mature,  (c) make an  assignment  for the  benefit  of
creditors,  or (d)  apply  for or  consent  to the  appointment  of a  receiver,
liquidator,  custodian  or  trustee  for it or  for a  substantial  part  of its
Properties  or business,  or such a receiver,  liquidator,  custodian or trustee
otherwise shall be appointed and shall not be discharged  within sixty (60) days
after such appointment; or

          8.1.7 Bankruptcy Proceedings.  Bankruptcy, insolvency,  reorganization
or liquidation  proceedings or other proceedings for relief under any bankruptcy
law or any law for the  relief of  debtors  shall be  instituted  by or  against
Borrower,  any Special  Purpose Entity that has incurred any  Indebtedness  with
recourse to, or guaranteed by,  Borrower,  or any Owner  Trustee,  or any order,
judgment or decree shall be entered against  Borrower,  any such Special Purpose
Entity or any Owner Trustee  decreeing its  dissolution  or division;  provided,
however,  with respect to an involuntary  petition in bankruptcy,  such petition
shall not have been  dismissed  within  sixty (60) days after the filing of such
petition; or

          8.1.8 Material  Adverse Effect.  There shall have been a change in the
assets, liabilities,  financial condition,  operations,  affairs or prospects of
Borrower,  any  Special  Purpose  Entity  that has  incurred  Indebtedness  with
recourse to, or guaranteed  by,  Borrower,  or any Owner Trustee  which,  in the
reasonable determination of Requisite Lenders has, either individually or in the
aggregate, had a Material Adverse Effect; or

          8.1.9  Judgments,  Writs  And  Attachments.  There  shall  be a  money
judgment,  writ or warrant of  attachment  or similar  process  entered or filed
against Borrower, any Special Purpose Entity that has incurred Indebtedness with
recourse to, or  guaranteed  by,  Borrower,  or any Owner  Trustee which (net of
insurance  coverage)  remains  unvacated,   unbonded,   unstayed  or  unpaid  or
undischarged  for more than sixty (60) days (whether or not  consecutive)  or in
any event later than five (5)  calendar  days prior to the date of any  proposed
sale  thereunder,  which,  together  with all such  other  unvacated,  unbonded,
unstayed, unpaid and undischarged judgments or attachments against Borrower, any
such  Special  Purpose  Entity or any Owner  Trustee  exceeds  in the  aggregate
$1,000,000; or

          8.1.10  Legal  Obligations.  Any of the Loan  Documents  shall for any
reason  other  than the full,  complete  and  indefeasible  satisfaction  of the
Obligations  thereunder  cease to be, or be  asserted by  Borrower,  any Special
Purpose  Entity or Owner  Trustee,  or any other  Loan Party not to be, a legal,
valid and binding  obligation of Borrower,  such Special Purpose Entity or Owner
Trustee, or such other Loan Party, respectively, enforceable against such Person
in accordance with its terms; or

          8.1.11 Change Of General Partner;  Equipment  Manager.  Either (a) FSI
shall  cease to be the sole  general  partner of  Borrower,  whether  due to the
voluntary or involuntary  withdrawal,  substitution,  removal or transfer of FSI
from or of all or any portion of FSI's general  partnership  interest or capital
contribution in Borrower or shall cease to maintain at least a five percent (5%)
ownership  interest  in the net  distributions  of  Borrower;  or (b) IMI or any
Affiliate of IMI shall cease to be the Equipment Manager of Borrower; or

          8.1.12 Change of Control. There occurs any Change of Control; or

          8.1.13 Criminal  Proceedings.  A criminal  proceeding  shall have been
filed in any court naming Borrower, any Special Purpose Entity that has incurred
any Indebtedness  with recourse to, or guaranteed by Borrower,  or Owner Trustee
as a defendant  for which  forfeiture is a potential  penalty  under  applicable
federal  or state  law  which,  in the  reasonable  determination  of  Requisite
Lenders, may have a Material Adverse Effect; or

          8.1.14 Action By Governmental  Authority.  Any Governmental  Authority
enters a decree, order or ruling ("Government Action") which will materially and
adversely  affect  Borrower's  financial  condition,  operations  or  ability to
perform  or pay  Borrower's  obligations  arising  under this  Agreement  or any
instrument  or  agreement  executed  pursuant to the terms of this  Agreement or
which will  similarly  affect any Special  Purpose  Entity that has incurred any
Indebtedness with recourse to, or guaranteed by, Borrower, or any Owner Trustee.
Borrower  shall have thirty (30) days from the earlier of the date (a)  Borrower
first  discovers that it or any such Special Purpose Entity or any Owner Trustee
is the subject of  Government  Action or (b) Agent or any Lender gives notice of
Government  Action to take such steps as are necessary to obtain relief from the
Government  Action.  For the purpose of this paragraph,  "relief from Government
Action" means to discharge or to obtain a dismissal of or release or relief from
(i) any Government Action so that the affected party or parties do not incur (A)
monetary  liability  of more  than  $1,000,000  in the  aggregate,  or (ii)  any
disqualification of or other limitation on the operation of Borrower,  any Owner
Trustee  or any  such  Special  Purpose  Entity,  or any of  them,  which in the
reasonable  determination  of  Requisite  Lenders  may have a  Material  Adverse
Effect; or

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

          8.1.16 Collateral.

               (i) (a) Any material provision of any Security Document shall for
any reason  cease to be valid and  binding  on or  enforceable  in any  material
respect against Borrower FSI or the Aircraft Owner Trustee or (b) Borrower,  FSI
or the Aircraft  Owner  Trustee  shall state that any material  provision of any
Security  Document to which it is party  shall for any reason  cease to be valid
and binding on or enforceable  against it in writing or bring an action to limit
its respective obligations or liabilities thereunder; or

               (ii) (a) any Security  Document  shall for any reason (other than
pursuant to the terms thereof) cease to create a valid security  interest in any
portion of the Collateral  purported to be covered  thereby or (b) such security
interest  shall for any  reason  (other  than the  failure  of Agent to take any
action  available to it to maintain  perfection of the Liens granted in favor of
Agent  pursuant to the  Security  Documents)  cease to be a perfected  and first
priority security interest with respect to any item of Collateral other than any
Trailers, Aircraft (except Aircraft Collateral),  Aircraft engines, Railcars and
marine vessels, in each case subject only to Permitted Liens; or

          8.1.17 Subordination  Agreement. Any Subordinated Lender shall fail to
perform  or  observe  any  term,   covenant  or   agreement   contained  in  the
Subordination Agreement.

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

     8.3 Remedies.  Upon the occurrence and during the  continuance of any Event
of  Default  or  Potential  Event of  Default,  Lenders  shall  have no  further
obligation to advance money or extend credit to or for the benefit of Borrower.

     In addition,  upon the occurrence and during the continuance of an Event of
Default, Lenders or Agent, on behalf of Lenders, may, at the option of Requisite
Lenders, do any one or more of the following, all of which are hereby authorized
by Borrower:

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

          8.3.2  Terminate  this  Agreement  as  to  any  future   liability  or
obligation of Agent or Lenders; and

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

     8.4 Set-Off.

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

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

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

SECTION 9. AGENT.

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

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

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

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

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

     9.6  Non-Reliance  On  Agent  And  Other  Lenders.  Each  Lender  expressly
acknowledges that neither Agent nor any of its officers,  directors,  employees,
agents,   attorneys-in-fact  or  Affiliates  has  made  any  representations  or
warranties  to it and  that no act by Agent  hereinafter  taken,  including  any
review  of  the  affairs  of  Borrower,   shall  be  deemed  to  constitute  any
representation  or warranty by Agent to any Lender.  Each Lender  represents  to
Agent that it has,  independently  and without  reliance upon Agent or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
operations,  property,  financial and other  condition and  creditworthiness  of
Borrower  and made its own decision to make its Loans  hereunder  and enter into
this  Agreement.  Each Lender also represents  that it will,  independently  and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such  investigation as
it deems  necessary to inform itself as to the business,  operations,  property,
financial  and other  condition  and  creditworthiness  of Borrower.  Except for
notices,  reports and other documents  expressly required to be furnished to the
Lenders by Agent hereunder or by the other Loan Documents,  Agent shall not have
any duty or  responsibility  to  provide  any  Lender  with any  credit or other
information concerning the business,  operations,  property, financial and other
condition or  creditworthiness of Borrower which may come into the possession of
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.  Notwithstanding anything contained in the preceding sentence to the
contrary,  Agent  agrees to  promptly  provide  Lenders  with (i)  copies of all
financial  statements,  reports and certificates  delivered by Borrower to Agent
hereunder,  (ii) copies of all notices and other communications  deemed by Agent
to be material,  relating to the  transactions  contemplated  by this Agreement,
that are sent or received by Agent, and (iii) any other  information,  financial
or otherwise,  deemed by Agent to be material,  relating to Borrower's financial
condition  or ability to perform its  obligations  hereunder,  furnished  to, or
obtained by, Agent hereunder.

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

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

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

SECTION 10. EXPENSES AND INDEMNITIES.

     10.1  Expenses.  Borrower  agrees that, as the following  costs,  expenses,
charges and other  disbursements  benefit Borrower,  Borrower,  unless otherwise
specified  in this  Section  10.1,  shall pay,  as its  Obligation,  promptly on
demand,  and in any event within thirty (30) days of the invoice date  therefor,
(a) all costs,  expenses,  charges and other disbursements  (including,  without
limitation, all reasonable attorneys' fees) incurred by or on behalf of Agent or
any Lender in  connection  with the  preparation  of the Loan  Documents and all
amendments  and  modifications  thereof,  extensions  thereto  or  substitutions
therefor, and all costs, expenses, charges or other disbursements incurred by or
on behalf of Agent or any Lender  (including,  without limitation all reasonable
attorney's  fees) in  connection  with the  furnishing  of  opinions  of counsel
(including,  without  limitation,  any  opinions  requested by Lenders as to any
legal matters arising hereunder) and of Borrower's performance of and compliance
with all agreements and conditions  contained herein or in any of the other Loan
Documents  on its part to be performed  or complied  with;  (b) all other costs,
expenses,  charges and other disbursements  incurred by or on behalf of Agent or
any  Lender  in  connection  with  the  negotiation,   preparation,   execution,
administration,  continuation  and  enforcement of the Loan  Documents,  and the
making of the Loans  hereunder,  including  without  limitation  the cost of UCC
searches and filing fees;  and (c) upon and during the  existence of an Event of
Default  or  Potential  Event of  Default,  all legal  expenses  (including  all
reasonable attorneys' fees), appraisal,  audit, accounting,  consulting or other
fees, costs,  expenses,  charges or other disbursements incurred by or on behalf
of Agent or any Lender in  connection  with any  litigation,  contest,  dispute,
suit,  proceeding or action (whether instituted by Lenders,  Agent,  Borrower or
any other  Person)  seeking to enforce any  Obligations  of, or  collecting  any
payments due from,  Borrower  under this  Agreement and the Notes,  all of which
amounts shall be deemed to be part of the Obligations;  provided,  however, that
Lenders  shall be entitled  to collect the full amount of such costs,  expenses,
charges and other disbursements only once.

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

          10.2.1 General Indemnity. Borrower shall pay, indemnify, and hold each
Lender,  Agent  and each of their  respective  officers,  directors,  employees,
counsel,  agents and attorneys-in-fact  (each, an "Indemnified Person") harmless
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions, judgments, suits, costs, charges, expenses or disbursements
(including  reasonable  attorney's  fees  and the  allocated  cost  of  in-house
counsel)  of any  kind or  nature  whatsoever  with  respect  to the  execution,
delivery, enforcement,  performance and administration of this Agreement and any
other Loan Documents,  or the transactions  contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other  Governmental  Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate  proceeding)  related to this Agreement or the Loans or
the use of the  proceeds  thereof,  whether or not any  Indemnified  Person is a
party thereto (all the foregoing,  collectively, the "Indemnified Liabilities");
provided,  that  Borrower  shall  not  have  any  obligation  hereunder  to  any
Indemnified  Person with  respect to  Indemnified  Liabilities  arising from the
gross negligence or willful misconduct of such Indemnified Person.

          10.2.2 Environmental Indemnity.

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

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

          10.2.3 Survival;  Defense.  The obligations in this Section 10.2 shall
survive  payment of all other  Obligations.  At the election of any  Indemnified
Person,  Borrower  shall  defend such  Indemnified  Person  using legal  counsel
satisfactory to such Indemnified Person in such Person's sole discretion, at the
sole cost and expense of  Borrower.  All amounts  owing under this  Section 10.2
shall be paid within thirty (30) days after written demand.

SECTION 11. MISCELLANEOUS.

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

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

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

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

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

     11.6 Entire Agreement; Construction; Amendments And Waivers.

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

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

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

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

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

     11.9 No Set-Offs By Borrower. All sums payable by Borrower pursuant to this
Agreement,  any Note or any of the other Loan Documents shall be payable without
notice or demand and shall be payable in United States Dollars  without  set-off
or reduction of any manner whatsoever. 11.10 Binding Effect, Assignment.

          11.10.1 This  Agreement,  the Notes and the other Loan Documents shall
be binding upon and shall inure to the benefit of the parties hereto and thereto
and their  respective  successors  and assigns,  except that Borrower  shall not
assign its rights  hereunder or  thereunder  or any  interest  herein or therein
without the prior written consent of each Lender.

          11.10.2  Subject to the  limitations  of this  Section  11.10.2,  each
Lender may sell and  assign,  from time to time,  all or any  portion of its Pro
Rata  Share  of  the  Commitments  to  any  Eligible  Assignee,  subject  to the
assumption  by  such  assignee  of the  share  of the  Commitments  so  assigned
(provided that any such partial  assignment  shall not be for a principal amount
of less than Five Million Dollars ($5,000,000)). The assignment to such Eligible
Assignee  shall be  evidenced by an  Assignment  and  Acceptance  in the form of
Exhibit  H  ("Assignment  and  Acceptance")  executed  by  the  assignor  Lender
(hereinafter  from time to time referred to as the  "Assignor  Lender") and such
Eligible Assignee or other financial  institution  (which,  upon such assignment
shall become a Lender  hereunder  (hereinafter  from time to time referred to as
the "Assignee  Lender")).  The Assignment and Acceptance need not include any of
the economic or financial  terms upon which such  Assignee  Lender  receives the
assignment from the Assignor Lender,  and such terms need not be disclosed to or
approved  by  Borrower;  provided  only  that  such  terms do not  diminish  the
obligations  undertaken by such Assignee Lender in the Assignment and Acceptance
or increase the obligations of Borrower under this Agreement.  Upon execution of
such Assignment and Acceptance, (a) the definition of "Commitments" in Section 1
hereof and the Pro Rata Shares set forth  therein  shall be deemed to be amended
to reflect each Lender's  share of the  Commitments,  after giving effect to the
assignment  and (b) the Assignee  Lender shall,  from the effective  date of the
Assignment and Acceptance, be subject to all of the obligations, and entitled to
all of the rights, of a Lender hereunder, except as may be expressly provided to
the contrary in the Assignment  and  Acceptance.  To the extent the  obligations
hereunder  of the  Assignor  Lender are  assumed  by the  Assignee  Lender,  the
Assignor  Lender shall be relieved of such  obligations.  Upon the assignment of
any  interest by any Assignor  Lender  pursuant to this  Section  11.10.2,  such
Assignor  Lender  agrees  to  supplement  Schedule  1.1 to show the date of such
assignment,  the Assignor  Lender,  the Assignee Lender,  the Assignee  Lender's
address for notice  purposes and the amount of the  Commitments so assigned.  In
connection and as a condition to each assignment hereunder,  the Assignor Lender
agrees to pay or to cause the Assignee  Lender to pay to Agent a processing  fee
of $3,500;  provided that no processing  fee shall be charged for any assignment
to a Lender or a Lender Affiliate.

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

          11.10.4 Notwithstanding the foregoing Sections 11.10.2 and 11.10.3, no
such  sale,   assignment  or  participation  grant  shall  result  in  requiring
registration  under the  Securities  Act of 1933, as amended,  or  qualification
under any state securities law.

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

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

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

     11.14 Waiver Of Punitive Damages.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS AGREEMENT,  BORROWER HEREBY AGREES THAT IT SHALL NOT SEEK FROM
LENDERS OR AGENT, UNDER ANY THEORY OF LIABILITY,  INCLUDING, WITHOUT LIMITATION,
ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.

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

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

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

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

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

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

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

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

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

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

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

     11.17 Waivers. Borrower hereby expressly waives (a) diligence, presentment,
demand for payment and protest  affecting  Borrower's  liability  under the Loan
Documents;  (b) discharge due to any disability of Borrower; (c) any defenses of
any other Person to  obligations  under the Loan Documents not arising under the
express terms of the Loan  Documents or from a material  breach thereof by Agent
or any Lender which under applicable law has the effect of discharging  Borrower
from the  Obligations;  (d) the  benefit of any act or  omission by Agent or any
Lender which directly or indirectly results in or aids the discharge of Borrower
from any of the  Obligations  by operation of law or otherwise;  (e) all notices
whatsoever, including, without limitation, notice of acceptance of the incurring
of the  Obligations;  (f) any  requirement  that Agent and  Lenders  exhaust any
right, power or remedy or proceed against any other Person or any other security
for, or any guarantor of, or any other party liable for, any of the Obligations,
or any portion thereof;  and (g) without limiting the foregoing,  the benefit of
California  Civil Code Sections 2809,  2810, 2819, 2839, 2845, 2848, 2849, 2850,
2899 and 1432.  Borrower  specifically  agrees that it shall not be necessary or
required,  and  Borrower  shall not be entitled  to  require,  that Agent or any
Lender  (i) file suit or  proceed  to  assert  or  obtain a claim  for  personal
judgment against any other Person for all or any part of the  Obligations;  (ii)
make  any  effort  at  collection  or  enforcement  of all or  any  part  of the
Obligations  from any other Person;  (iii) foreclose  against or seek to realize
upon any collateral or any other  security now or hereafter  existing for all or
any part of the  Obligations;  (iv) file suit or  proceed  to obtain or assert a
claim for personal  judgment  against  Borrower or any  guarantor or other party
liable for all or any part of the Obligations;  (v) exercise or assert any other
right or remedy to which Agent or any Lender is or may be entitled in connection
with the Obligations or any security or guaranty  relating thereto to assert; or
(vi) file any claim against  assets of any other Person before or as a condition
of enforcing the liability of Borrower under this Agreement or the Notes.

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

     11.19 Judicial Reference.

               (a) Other than (a)  nonjudicial  foreclosure  and all  matters in
connection  therewith regarding security interests in real or personal property;
or (b) the  appointment  of a receiver,  or the  exercise  of other  provisional
remedies  (any and all of which may be initiated  pursuant to  applicable  law),
each  controversy,  dispute  or claim  between  the  parties  arising  out of or
relating  to this  Agreement  or the other Loan  Documents,  which  controversy,
dispute or claim is not  settled in writing  within  thirty  (30) days after the
"Claim  Date"  (defined as the date on which a party  subject to this  Agreement
gives written notice to all other parties that a  controversy,  dispute or claim
exists),  will be settled by a reference  proceeding in California in accordance
with the  provisions  of Section  638 et seq.  of the  California  Code of Civil
Procedure,  or their  successor  sections  ("CCP"),  which shall  constitute the
exclusive  remedy  for the  settlement  of any  controversy,  dispute  or  claim
concerning this Agreement and the other Loan Documents,  including  whether such
controversy,  dispute or claim is subject to the reference proceeding and except
as set forth  above,  the  parties  waive  their  rights to  initiate  any legal
proceedings  against  each  other in any court or  jurisdiction  other  than the
Superior Court in the County where the real property,  if any, is located or San
Francisco County, if none (the "Court"). The referee shall be a retired Judge of
the Court  selected by mutual  agreement of the  parties,  and if they cannot so
agree within  forty-five  (45) days after the Claim Date,  the referee  shall be
promptly   selected   by  the   Presiding   Judge  of  the  Court  (or   his/her
representative).  The referee  shall be appointed  to sit as a temporary  judge,
with all of the powers for a temporary  judge,  as  authorized  by law, and upon
selection shall take and subscribe to the oath of office as provided for in Rule
244 of the California  Rules of Court (or any subsequently  enacted Rule).  Each
party shall have one peremptory challenge pursuant to CCP ss. 170.6. The referee
shall (x) be  requested  to set the matter for  hearing  within  sixty (60) days
after the date of selection of the referee and (y) try any and all issues of law
or fact and report a statement of decision upon them, if possible, within ninety
(90) days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered  pursuant to CCP ss. 644 in
any court in the State of California  having  jurisdiction.  Any party may apply
for a reference  proceeding at any time after thirty (30) days following  notice
to any other party of the nature of the controversy, dispute or claim, by filing
a petition for a hearing and/or trial. All discovery permitted by this Agreement
or any other Loan  Document  shall be  completed no later than fifteen (15) days
before the first hearing date established by the referee. The referee may extend
such period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised to
such  discovery  or  unavailability  of a witness due to absence or illness.  No
party shall be entitled to "priority" in conducting  discovery.  Depositions may
be taken by either  party upon seven (7) days  written  notice,  and request for
production or inspection of documents shall be responded to within ten (10) days
after service.  All disputes  relating to discovery  which cannot be resolved by
the parties shall be submitted to the referee whose  decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Court is  empowered  to issue  temporary  and/or  provisional  remedies,  as
appropriate.

               (b) Except as expressly set forth in this Agreement,  the referee
shall  determine  the  manner in which the  reference  proceeding  is  conducted
including  the time and  place of all  hearings,  the order of  presentation  of
evidence,  and all other  questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the referee,
except for trial,  shall be conducted  without a court reporter except that when
any party so requests,  a court  reporter will be used at any hearing  conducted
before the referee. The party making such a request shall have the obligation to
arrange for and pay for the court  reporter.  The costs of the court reporter at
the trial shall be borne equally by the parties.

               (c) The  referee  shall be required  to  determine  all issues in
accordance  with  existing  case  law and the  statutory  laws of the  State  of
California.  The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding.  The referee shall
be  empowered  to  enter  equitable  as well as legal  relief,  to  provide  all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the  reference  proceeding  that  shall  dispose  of all of the claims of the
parties  that are the subject of the  reference.  The parties  hereto  expressly
reserve the right to contest or appeal from the final judgment or any appealable
order  or  appealable  judgment  entered  by the  referee.  The  parties  hereto
expressly reserve the right to findings of fact,  conclusions of laws, a written
statement  of  decision,  and the right to move for a new  trial or a  different
judgment,  which new trial,  if granted,  is also to be a  reference  proceeding
under this provision.

               (d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted),  any
dispute  between the parties that would otherwise be determined by the reference
procedure herein  described will be resolved and determined by arbitration.  The
arbitration  will be conducted by a retired  judge of the Court,  in  accordance
with the California  Arbitration Act, ss. 1280 through ss. 1294.2 of the CCP, as
amended  from time to time.  The  limitations  with  respect to discovery as set
forth hereinabove shall apply to any such arbitration proceeding.

     11.20 Waiver Of Jury Trial.  WITHOUT  LIMITING THE INTENTION OF THE PARTIES
THAT THE  PROCEDURES  SET FORTH IN SECTION  11.19  APPLY TO THE  MAXIMUM  EXTENT
CONTEMPLATED  THEREIN,  TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER,  BY
EXECUTION  HEREOF,  AND  THE  AGENT  AND  EACH  LENDER,  BY  ACCEPTANCE  HEREOF,
KNOWINGLY,  VOLUNTARILY  AND  INTENTIONALLY  WAIVE ANY RIGHT  THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION  BASED ON THIS AGREEMENT,  OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE  EXECUTED IN  CONNECTION  WITH THIS  AGREEMENT,  OR ANY COURSE OF CONDUCT,
COURSE OF  DEALING,  STATEMENTS  (WHETHER  VERBAL OR  WRITTEN) OR ACTIONS OF ANY
PARTY WITH RESPECT HERETO.  THIS PROVISION IS A MATERIAL INDUCEMENT TO THE AGENT
AND EACH LENDER TO ACCEPT THIS AGREEMENT AND THE NOTES EXECUTED AND DELIVERED BY
BORROWER PURSUANT TO THIS AGREEMENT.




<PAGE>



                         CREDIT AGREEMENT SIGNATURE PAGE

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

BORROWER:               PLM EQUIPMENT GROWTH FUND VI

                        BY PLM FINANCIAL SERVICES, INC.,
                         ITS GENERAL PARTNER


                         By    /s/Stephen M. Bess
                           ----------------------------------------------------
                         Stephen M. Bess
                         President and Chief Executive Officer


                         Notice to be sent to:

                         120 Montgomery, Suite 1350
                         San Francisco, CA 94104
                         Attention: Stephen M. Bess
                         Telephone:     415/974-1399
                         Telecopy:      415/882-0860

                         With a copy to:

                         450 Carillon Parkway, Suite 200
                         St. Petersburg, Florida  33716
                         Attention:  General Counsel
                         Telephone:
                         Telecopy:

AGENT:                   COMERICA BANK-CALIFORNIA


                         By    /s/Misako Noda
                           ----------------------------------------------------
                         Misako Noda
                         Vice President

                         Notice to be sent to:

                         Comerica Bank-California
                         275 Battery Street, Suite 1100
                         San Francisco, CA 94111
                         Attention:     Misako Noda, Vice President
                         Telephone:     415/954-5003
                         Facsimile:     415/954-5020



<PAGE>




LENDERS:                COMERICA BANK-CALIFORNIA


                        By    /s/Misako Noda
                          -----------------------------------------------------
                        Misako Noda
                        Vice President

                        Notice to be sent to:

                        Comerica Bank-California
                        275 Battery Street, Suite 1100
                        San Francisco, CA 94111
                        Attention:     Misako Noda, Vice President
                        Telephone:     415/954-5003
                        Facsimile:     415/954-5020

                        PFF BANK & TRUST


                        By  /s/Steve Capps
                          -----------------------------------------------------
                        Printed Name: Steve Capps
                        Title: Vice President

                        Notice to be sent to:

                        PFF Bank & Trust
                        9467 Milliken Ave.
                        P.O. Box 2729
                        Rancho Cucamonga, CA 91729-2729
                        Attention:    Steve Capps, Vice President
                        Telephone: (909) 481-3117
                        Facsimile: (909) 481-3115



<PAGE>



                                   SCHEDULE A

                                  (COMMITMENTS)


                                                                      Pro Rata
Lender                                   Commitment                    Share

Comerica Bank-California                 $15,000,000                     50%

PFF Bank & Trust                         $ 15,000,000                    50%



<PAGE>




                                  SCHEDULE 4.5

               EXECUTIVE OFFICES AND PRINCIPAL PLACES OF BUSINESS


   For Borrower: 120 Montgomery, Suite 1350, San Francisco, California 94104.



<PAGE>



                                  SCHEDULE 4.6

                                   LITIGATION



                                      None.





<PAGE>




                                  SCHEDULE 4.7

                               MATERIAL CONTRACTS


The Limited Partnership Agreement

The Management Agreements

Existing Note Agreement

Warehousing Credit Agreement







<PAGE>




                                  SCHEDULE 4.8

                              CONSENT AND APPROVALS


None.



<PAGE>



                                  SCHEDULE 4.15

                            ENVIRONMENTAL DISCLOSURES


None.



<PAGE>


                                CREDIT AGREEMENT

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                               Page
<S>                                                                                                              <C>
SECTION 1.DEFINITIONS.............................................................................................1

         1.1      Defined Terms...................................................................................1

         1.2      Accounting Terms...............................................................................20

         1.3      Other Terms....................................................................................20

         1.4      Schedules And Exhibits.........................................................................21

SECTION 2.AMOUNT AND TERMS OF CREDIT.............................................................................21

         2.1      Commitment To Lend.............................................................................21

                  2.1.1    Term Facility.........................................................................21

                           (a)      Facility Commitments.........................................................21

                           (b)      Each Loan....................................................................22

                           (c)      Fees.........................................................................22

                  2.1.2    Funding...............................................................................23

                  2.1.3    Utilization Of The Loans..............................................................23

         2.2      Repayment And Prepayment; Reduction or Termination of Commitments..............................23

                  2.2.1    Repayment.............................................................................23

                  2.2.2    Voluntary Prepayment..................................................................23

                  2.2.3    Mandatory Prepayments.................................................................24

2.3      CALCULATION OF FEES AND INTEREST; POST-MATURITY INTEREST................................................25

2.4      MANNER OF PAYMENTS......................................................................................26

         2.5      Payment On Non-Business Days...................................................................26

         2.6      Application Of Payments........................................................................26

         2.7      Procedure For The Borrowing Of Loans...........................................................26

                  2.7.1    Notice Of Borrowing...................................................................26

                  2.7.2    Unavailability Of LIBOR Loans.........................................................27

         2.8      Conversion And Continuation Elections..........................................................27

                  2.8.1    Election..............................................................................27

                  2.8.2    Notice Of Conversion..................................................................27

                  2.8.3    Interest Period.......................................................................28

                  2.8.4    Unavailability Of LIBOR Loans.........................................................28

         2.9      Discretion Of Lenders As To Manner Of Funding..................................................28

         2.10     Distribution Of Payments.......................................................................28

         2.11     Agent's Right To Assume Funds Available For Advances...........................................28

         2.12     Agent's Right To Assume Payments Will Be Made By Borrower......................................29

         2.13     Capital Requirements...........................................................................29

         2.14     Taxes..........................................................................................29

                  2.14.1   No Deductions.........................................................................29

                  2.14.2   Miscellaneous Taxes...................................................................30

                  2.14.3   Indemnity.............................................................................30

                  2.14.4   Required Deductions...................................................................30

                  2.14.5   Evidence of Payment...................................................................30

                  2.14.6   Foreign Persons.......................................................................30

                  2.14.7   Income Taxes..........................................................................31

                  2.14.8   Reimbursement Of Costs................................................................32

                  2.14.9   Jurisdiction..........................................................................32

         2.15     Illegality.....................................................................................32

                  2.15.1   LIBOR Loans...........................................................................32

                  2.15.2   Prepayment............................................................................32

                  2.15.3   Base Rate Borrowing...................................................................32

         2.16     Increased Costs................................................................................32

         2.17     Inability To Determine Rates...................................................................32

         2.18     Prepayment Penalties...........................................................................33

                  2.18.1   Prepayment of LIBOR Loans.............................................................33

                  2.18.2   Prepayment of Cost of Funds Rate Loans................................................33

SECTION 3.CONDITIONS PRECEDENT TO THE MAKING OF LOANS............................................................33

         3.1      Conditions to First Advance....................................................................33

                  3.1.1    Partnership, Company And Corporate Documents..........................................33

                  3.1.2    Notes.................................................................................34

                  3.1.3    Termination of Existing Note Agreement; Repayment of Existing Notes...................34

                  3.1.4    Opinion Of Company Counsel............................................................34

                  3.1.5    Subordination Agreement...............................................................34

                  3.1.6    Bringdown Certificate.................................................................34

                  3.1.7    Material Adverse Effect...............................................................35

                  3.1.8    Security Documents....................................................................35

                  3.1.9    Payment of Fees.......................................................................35

                  3.1.10   First Amendment to Warehousing Credit Agreement.......................................35

                  3.1.11   Second Amendment to Limited Partnership Agreement.....................................35

                  3.1.12   Due Diligence.........................................................................35

                  3.1.13   Other Documents.......................................................................35

         3.2      Conditions to Each Advance.....................................................................35

                  3.2.1    Notice Of Borrowing; Certificates.....................................................35

                  3.2.2    No Event Of Default...................................................................36

                  3.2.3    Officer's Certificate.................................................................36

                  3.2.4    Insurance.............................................................................36

                  3.2.5    Other Instruments.....................................................................36

         3.3      Conditions to Second Advance...................................................................36

                  3.3.1    Partnership, Company And Corporate Documents..........................................36

                  3.3.2    Opinion Of Company Counsel............................................................37

                  3.3.3    Opinion Of FAA Counsel................................................................37

                  3.3.4    Security Documents....................................................................37

                  3.3.5    Consent and Agreement.................................................................37

         3.4      Further Conditions To All Loans................................................................38

                  3.4.1    General Partner; Manager..............................................................38

                  3.4.2    Removal Of General Partner............................................................38

         3.5      Satisfaction of Closing Conditions.............................................................38

SECTION 4.BORROWER'S REPRESENTATIONS AND WARRANTIES..............................................................38

         4.1      Existence And Power............................................................................38

         4.2      Loan Documents And Notes Authorized; Binding Obligations.......................................39

         4.3      No Conflict; Legal Compliance..................................................................39

         4.4      Financial Condition............................................................................39

         4.5      Executive Offices..............................................................................39

         4.6      Litigation.....................................................................................39

         4.7      Material Contracts.............................................................................40

         4.8      Consents And Approvals.........................................................................40

         4.9      Other Agreements...............................................................................40

         4.10     Employment And Labor Agreements................................................................40

         4.11     ERISA..........................................................................................40

         4.12     Labor Matters..................................................................................41

         4.13     Margin Regulations.............................................................................41

         4.14     Taxes..........................................................................................41

4.15     ENVIRONMENTAL QUALITY...................................................................................42

4.16     TRADEMARKS, PATENTS, COPYRIGHTS, FRANCHISES AND LICENSES................................................42

         4.17     Full Disclosure................................................................................42

         4.18     Other Regulations..............................................................................42

         4.19     Solvency.......................................................................................43

         4.20     Survival Of Representations And Warranties.....................................................43

SECTION 5.BORROWER'S AFFIRMATIVE COVENANTS.......................................................................43

         5.1      Records And Reports............................................................................43

                  5.1.1    Quarterly Statements..................................................................43

                  5.1.2    Annual Statements.....................................................................43

                  5.1.3    Equipment Schedule....................................................................44

                  5.1.4    Asset Coverage Ratio Compliance Certificate...........................................44

                  5.1.5    Compliance Certificate................................................................44

                  5.1.6    Reports...............................................................................44

                  5.1.7    Insurance Reports.....................................................................44

                  5.1.8    Certificate Of Responsible Officer....................................................44

                  5.1.9    Employee Benefit Plans................................................................45

                  5.1.10   ERISA Notices.........................................................................45

                  5.1.11   Pension Plans.........................................................................45

                  5.1.12   SEC Reports...........................................................................45

                  5.1.13   Tax Returns...........................................................................45

                  5.1.14   Additional Information................................................................45

         5.2      Appraisals.....................................................................................46

         5.3      Existence; Compliance With Law.................................................................46

         5.4      Insurance......................................................................................46

         5.5      Taxes And Other Liabilities....................................................................47

         5.6      Inspection Rights; Assistance..................................................................47

         5.7      Maintenance Of Facilities; Modifications; Performance of Leases................................47

                  5.7.1    Maintenance Of Facilities.............................................................47

                  5.7.2    Certain Modifications To The Equipment................................................47

                  5.7.3    Performance of Leases.................................................................47

         5.8      Special Provisions for Aircraft................................................................47

                  5.8.1    Maintenance and Servicing of Aircraft.................................................47

                  5.8.2    Public Liability and Property Damage Liability Insurance for Aircraft.................48

                  5.8.3    Insurance Against Loss or Damage to the Aircraft......................................48

         5.9      Supplemental Disclosure........................................................................48

         5.10     Further Assurances.............................................................................48

         5.11     Environmental Laws.............................................................................49

         5.12     Operating Relationship.........................................................................49

         5.13     Lockbox Agreement..............................................................................49

SECTION 6.BORROWER'S NEGATIVE COVENANTS..........................................................................50

         6.1      Liens; Negative Pledges; And Encumbrances......................................................50

         6.3      Limitations On Indebtedness....................................................................51

         6.4      Use Of Proceeds................................................................................52

         6.6      Restriction On Fundamental Changes.............................................................52

         6.7      Transactions With Affiliates...................................................................52

         6.9      No Investment..................................................................................52

         6.10     Maintenance Of Business........................................................................53

         6.12     No Subsidiaries................................................................................53

         6.13     No Distributions; Management Fees..............................................................53

         6.14     Events Of Default..............................................................................53

         6.15     ERISA..........................................................................................53

         6.16     No Use Of Any Lender's Name....................................................................54

         6.17     Certain Accounting Changes.....................................................................54

         6.18     Amendment Of Limited Partnership Agreement.....................................................54

SECTION 7.FINANCIAL COVENANTS OF BORROWER........................................................................54

         7.1      Minimum Operating Cash Flow Coverage Ratio.....................................................54

         7.2      Minimum Total Cash Flow Coverage Ratio.........................................................54

         7.3      Maximum Leverage Ratio.........................................................................54

         7.4      Minimum Asset Coverage Ratio...................................................................54

SECTION 8.EVENTS OF DEFAULT AND REMEDIES.........................................................................55

         8.1      Events Of Default..............................................................................55

                  8.1.1    Failure To Make Payments..............................................................55

                  8.1.2    Other Agreements......................................................................55

                  8.1.3    Breach Of Covenants...................................................................55

                  8.1.4    Breach Of Representations Or Warranties...............................................55

                  8.1.5    Failure To Cure.......................................................................55

                  8.1.6    Insolvency............................................................................56

                  8.1.7    Bankruptcy Proceedings................................................................56

                  8.1.8    Material Adverse Effect...............................................................56

                  8.1.9    Judgments, Writs And Attachments......................................................56

                  8.1.10   Legal Obligations.....................................................................56

                  8.1.11   Change Of General Partner; Equipment Manager..........................................56

                  8.1.12   Change of Control.....................................................................57

                  8.1.13   Criminal Proceedings..................................................................57

                  8.1.14   Action By Governmental Authority......................................................57

                  8.1.15   Governmental Decrees..................................................................57

                  8.1.16   Collateral............................................................................57

                  8.1.17   Subordination Agreement...............................................................58

         8.2      Waiver Of Default..............................................................................58

         8.3      Remedies.......................................................................................58

         8.4      Set-Off........................................................................................58

         8.5      Rights And Remedies Cumulative.................................................................59

SECTION 9.AGENT..................................................................................................59

         9.1      Appointment....................................................................................59

         9.2      Delegation Of Duties...........................................................................60

         9.3      Exculpatory Provisions.........................................................................60

         9.4      Reliance By Agent..............................................................................60

         9.5      Notice Of Default..............................................................................60

         9.6      Non-Reliance On Agent And Other Lenders........................................................61

         9.7      Indemnification................................................................................61

         9.8      Agent In Its Individual Capacity...............................................................62

         9.9      Resignation And Appointment Of Successor Agent.................................................62

SECTION 10.EXPENSES AND INDEMNITIES..............................................................................62

         10.1     Expenses.......................................................................................62

         10.2     Indemnification................................................................................63

                  10.2.1   General Indemnity.....................................................................63

                  10.2.2   Environmental Indemnity...............................................................63

                  10.2.3   Survival; Defense.....................................................................64

SECTION 11.MISCELLANEOUS.........................................................................................64

         11.1     Survival.......................................................................................64

         11.2     No Waiver By Agent Or Lenders..................................................................64

         11.3     Notices........................................................................................64

         11.4     Headings.......................................................................................65

         11.5     Severability...................................................................................65

         11.6     Entire Agreement; Construction; Amendments And Waivers.........................................65

         11.7     Reliance By Lenders............................................................................65

         11.8     Marshaling; Payments Set Aside.................................................................66

         11.9     No Set-Offs By Borrower........................................................................66

         11.10    Binding Effect, Assignment.....................................................................66

         11.11    Counterparts...................................................................................67

         11.12    Equitable Relief...............................................................................67

         11.13    Written Notice Of Claims; Claims Bar...........................................................67

         11.14    Waiver Of Punitive Damages.....................................................................68

         11.15    Relationship Of Parties........................................................................68

         11.16    Obligations Of Borrower........................................................................68

         11.17    Waivers........................................................................................69

         11.18    Governing Law..................................................................................70

         11.19    Judicial Reference.............................................................................70

         11.20    Waiver Of Jury Trial...........................................................................71
</TABLE>



<PAGE>


         Index of Exhibits

Exhibit A.........Form of Note

Exhibit B.........Form of Equipment Schedule

Exhibit C.........Form of Asset Coverage Ratio Compliance Certificate

Exhibit D.........Form of Opinion of Company Counsel

Exhibit E.........Form of Subordination Agreement

Exhibit F.........Form of Compliance Certificate

Exhibit G.........Form of Notice of Borrowing

Exhibit H.........Form of Notice of Conversion/Continuation

Exhibit I.........Form of Assignment and Acceptance

Exhibit J.........Form of Security Agreement

Exhibit K.........Form of First Amendment to Warehousing Credit Agreement

<PAGE>


INDEX OF SCHEDULES


Schedule A                 Commitments

Schedule 1.1               Amendments to Schedule A

Schedule 4.5               Executive Offices and Principal Places of Business

Schedule 4.6               Litigation

Schedule 4.7               Material Contracts

Schedule 4.8               Consent and Approvals

Schedule 4.15              Environmental Disclosures