[Execution Copy]







                           Loan and Security Agreement

                                 by and between

                         CONGRESS FINANCIAL CORPORATION
                                    as Lender

                                       and

                             RADCO INDUSTRIES, INC.
                                   as Borrower




                             Dated: October 31, 1997


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

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

SECTION 2.        CREDIT FACILITIES.......................................... 10
         2.1      Loans...................................................... 10
         2.2      Letter of Credit Accommodations............................ 11
         2.3      Availability Reserves...................................... 13

SECTION 3.        INTEREST AND FEES.......................................... 13
         3.1      Interest................................................... 13
         3.2      Closing Fee................................................ 14
         3.3      Servicing Fee.............................................. 14
         3.4      Unused Line Fee............................................ 14

SECTION 4.        CONDITIONS PRECEDENT....................................... 14
         4.1      Conditions Precedent to Initial Loans and Letter of Credit
                  Accommodations............................................. 14
         4.2      Conditions Precedent to All Loans and Letter of Credit
                  Accommodations............................................. 17

SECTION 5.        GRANT OF SECURITY INTEREST................................. 17

SECTION 6.        COLLECTION AND ADMINISTRATION.............................. 18
         6.1      Borrower's Revolving Loan Account.......................... 18
         6.2      Statements................................................. 18
         6.3      Collection of Accounts..................................... 19
         6.4      Payments................................................... 20
         6.5      Authorization to Make Loans................................ 21
         6.6      Use of Proceeds............................................ 21

SECTION 7.        COLLATERAL REPORTING AND COVENANTS......................... 21
         7.1      Collateral Reporting....................................... 21
         7.2      Accounts Covenants......................................... 22
         7.3      Inventory Covenants........................................ 23
         7.4      Equipment Covenants........................................ 24
         7.5      Power of Attorney.......................................... 24
         7.6      Right to Cure.............................................. 25
         7.7      Access to Premises......................................... 25

SECTION 8.        REPRESENTATIONS AND WARRANTIES............................. 26
         8.1      Corporate Existence, Power and Authority; Subsidiaries..... 26
         8.2      Financial Statements; No Material Adverse Change........... 26

                                       (i)

<PAGE>



         8.3      Chief Executive Office; Collateral Locations............... 27
         8.4      Priority of Liens; Title to Properties..................... 27
         8.5      Tax Returns................................................ 27
         8.6      Litigation................................................. 27
         8.7      Compliance with Other Agreements and Applicable Law........ 27
         8.8      Employee Benefits.......................................... 28
         8.9      Environmental Compliance................................... 29
         8.10     Bank Accounts.............................................. 30
         8.11     Acquisition of Purchased Assets............................ 30
         8.12     Capitalization............................................. 30
         8.13     Accuracy and Completeness of Information................... 31
         8.14     Survival of Warranties; Cumulative......................... 31

SECTION 9.        AFFIRMATIVE AND NEGATIVE COVENANTS......................... 31
         9.1      Maintenance of Existence................................... 31
         9.2      New Collateral Locations................................... 32
         9.3      Compliance with Laws, Regulations, Etc..................... 32
         9.4      Payment of Taxes and Claims................................ 33
         9.5      Insurance.................................................. 33
         9.6      Financial Statements and Other Information................. 34
         9.7      Sale of Assets, Consolidation, Merger, Dissolution, Etc.... 35
         9.8      Encumbrances............................................... 35
         9.9      Indebtedness............................................... 36
         9.10     Loans, Investments, Guarantees, Etc........................ 38
         9.11     Dividends and Redemptions.................................. 38
         9.12     Transactions with Affiliates............................... 39
         9.13     Additional Bank Accounts................................... 39
         9.14     Compliance with ERISA...................................... 40
         9.15     Costs and Expenses......................................... 40
         9.16     Further Assurances......................................... 40

SECTION 10.     EVENTS OF DEFAULT AND REMEDIES............................... 41
         10.1     Events of Default.......................................... 41
         10.2     Remedies................................................... 43

SECTION 11.    JURY TRIAL WAIVER; OTHER WAIVERS
                      AND CONSENTS; GOVERNING LAW............................ 44
         11.1     Governing Law; Choice of Forum; Service of Process; Jury Trial
                  Waiver..................................................... 44
         11.2     Waiver of Notices.......................................... 45
         11.3     Amendments and Waivers..................................... 46
         11.4     Waiver of Counterclaims.................................... 46
         11.5     Indemnification............................................ 46

                                      (ii)

<PAGE>




SECTION 12.  TERM OF AGREEMENT; MISCELLANEOUS................................ 46
         12.1      Term...................................................... 46
         12.2      Notices................................................... 48
         12.3      Partial Invalidity........................................ 48
         12.4      Successors................................................ 48
         12.5      Entire Agreement.......................................... 48


                                      (iii)

<PAGE>




                                    INDEX TO
                             EXHIBITS AND SCHEDULES


     Exhibit A       Information Certificate

     Schedule 6.3    Bank Accounts

     Schedule 8.4    Existing Liens

     Schedule 8.7    Permits

     Schedule 8.8    Pension Matters

     Schedule 8.9    Environmental Matters

     Schedule 9.9    Existing Indebtedness

     Schedule 9.10   Existing Loans, Advances and Guarantees








                                       (i)

<PAGE>



                           LOAN AND SECURITY AGREEMENT


         This Loan and Security Agreement dated October 31, 1997 is entered into
by  and  between  Congress  Financial  Corporation,   a  California  corporation
("Lender") and Radco Industries, Inc., a Minnesota corporation ("Borrower").


                              W I T N E S S E T H:


         WHEREAS,   Borrower  has  requested  that  Lender  enter  into  certain
financing arrangements with Borrower pursuant to which Lender may make loans and
provide other financial accommodations to Borrower; and

         WHEREAS,  Lender  is  willing  to make  such  loans  and  provide  such
financial accommodations on the terms and conditions set forth herein;

         NOW,   THEREFORE,   in  consideration  of  the  mutual  conditions  and
agreements set forth herein, and for other good and valuable consideration,  the
receipt and  sufficiency  of which is hereby  acknowledged,  the parties  hereto
agree as follows:


SECTION
1.       DEFINITIONS

         All terms used  herein  which are  defined in Article 1 or Article 9 of
the  Uniform  Commercial  Code  shall have the  meanings  given  therein  unless
otherwise  defined in this Agreement.  All references to the plural herein shall
also mean the singular and to the singular shall also mean the plural unless the
context  otherwise  requires.  All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include  their  respective  successors  and assigns.  The words  "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this  Agreement  shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified,  supplemented,  extended,  renewed, restated or replaced. The
word  "including"  when used in this Agreement  shall mean  "including,  without
limitation".  An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner  satisfactory  to  Lender,  if such  Event of Default is capable of being
cured as determined by Lender.  Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance  with GAAP. For purposes of this  Agreement,  the following  terms
shall have the respective meanings given to them below:




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         1.1 "Accounts"  shall mean all present and future rights of Borrower to
payment  for  goods  sold or  leased  or for  services  rendered,  which are not
evidenced  by  instruments  or  chattel  paper,  and  whether  or not  earned by
performance.

         1.2  "Affiliate"  shall mean, with respect to a specified  person,  any
other person (a) which directly or indirectly through one or more intermediaries
controls,  or is controlled by, or is under common control with,  such specified
person,  (b) which  beneficially  owns or holds five (5%) percent or more of any
class of the voting stock or other equity interest of such specified  person, or
(c) of which  five (5%)  percent  or more of the  voting  stock or other  equity
interest is beneficially  owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings,  the terms "controlling",  "controlled by" and "under
common control with") when used with respect to any specified  person shall mean
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction of the  management  and policies of such person,  whether  through the
ownership of voting stock, by agreement or otherwise.

         1.3   "Availability   Reserves"   shall   mean,   as  of  any  date  of
determination, such amounts as Lender may from time to time establish and revise
in good faith  reducing the amount of Loans and Letter of Credit  Accommodations
which would  otherwise  be available  to Borrower  under the lending  formula(s)
provided for herein: (a) to reflect events,  conditions,  contingencies or risks
which,  as determined  by Lender in good faith,  do or may affect either (i) the
Collateral or any other  property  which is security for the  Obligations or its
value,  (ii) the  assets,  business or  prospects  of Borrower or any Obligor or
(iii)  the  security  interests  and other  rights  of Lender in the  Collateral
(including  the  enforceability,  perfection  and  priority  thereof)  or (b) to
reflect  Lender's  good faith  belief that any  collateral  report or  financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been  incomplete,  inaccurate or misleading in any material  respect or
(c) to  reflect  outstanding  Letter of Credit  Accommodations  as  provided  in
Section  2.2  hereof  or (d) in  respect  of any  state  of facts  which  Lender
determines in good faith  constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.

          1.4  "Blocked  Accounts"  shall have the  meaning set forth in Section
               6.3 hereof.

         1.5 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which  commercial  banks are  authorized or required to close under
the laws of the State of New York or the Commonwealth of Pennsylvania, and a day
on which Lender is open for the transaction of business.

         1.6  "Change  of  Control"  shall  mean  the  occurrence  of any of the
following:  (a) any Person or Persons  (other  than a Permitted  Holder)  acting
together  which would  constitute  a "group" (a "Group") for purposes of Section
13(d)(3) of the Securities  Exchange Act, together with any Affiliates  thereof,
shall beneficially own (as defined in Rule 13d-3 of the Securities  Exchange Act
at least fifty (50%)  percent of the  aggregate  voting  power of all classes of
Capital



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<PAGE>



Stock of Borrower  entitled to vote  generally  in the  election of directors of
Borrower or (b) any Person or Group  (other than a Permitted  Holder),  together
with any Affiliates thereof,  shall succeed in having sufficient of its or their
nominees  elected to the Board of Directors  of Borrower so that such  nominees,
when added to any  existing  directors  remaining  on the Board of  Directors of
Borrower after such election who is an Affiliate of such Person or Group,  shall
constitute a majority of the Board of Directors of Borrower.

         1.7 "Code"  shall mean the Internal  Revenue Code of 1986,  as the same
now exists or may from time to time hereafter be amended,  modified,  recodified
or  supplemented,  together  with all  rules,  regulations  and  interpretations
thereunder or related thereto.

         1.8  "Collateral" shall have the meaning set forth in Section 5 hereof.

         1.9  "Consolidated Net Income" shall mean, with respect to Borrower for
any  period,  the  aggregate  of the net  income  (loss) of such  Person and its
Subsidiaries,  on a consolidated basis, for such period (excluding to the extent
included  therein any  extraordinary  gains and  extraordinary  non-cash losses)
after  deducting all charges which should be deducted before arriving at the net
income  (loss) for such period and after  deducting  the Provision for Taxes for
such period, all as determined in accordance with GAAP; provided,  that, (a) the
net  income  of any  Person  that is not a  wholly-owned  Subsidiary  or that is
accounted for by the equity  method of accounting  shall be included only to the
extent of the amount of dividends or  distributions  paid or payable to Borrower
or a wholly-owned  Subsidiary of such person;  (b) except to the extent included
pursuant to the foregoing clause,  the net income of any Person accrued prior to
the date it becomes a  wholly-owned  Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person's  assets  are  acquired  by such  Person  or by any of its  wholly-owned
Subsidiaries  shall be  excluded;  (c) the  effect of any  change in  accounting
principles  adopted by such  Person or its  Subsidiaries  after the date  hereof
shall be excluded;  (d) net income shall exclude interest accruing, but not paid
on indebtedness owing to a Subsidiary or parent  corporation of Borrower,  which
is subordinated  in right of payment to the payment in full of the  Obligations,
on terms  and  conditions  acceptable  to  Lender;  and (e) the net  income  (if
positive) of any  wholly-owned  Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such wholly-owned Subsidiary to
Borrower or to any other wholly-owned  Subsidiary of Borrower is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment,  decree, order, statute, rule or governmental regulation applicable to
such  wholly-owned  Subsidiary  shall  be  excluded.  For the  purposes  of this
definition, (i) net income excludes any gain and non-cash loss (but not any cash
loss)  together with any related  Provision for Taxes for such gain and non-cash
loss (but not any cash loss) realized upon the sale or other  disposition of any
assets that are not sold in the ordinary course of business (including,  without
limitation,  dispositions pursuant to sale and leaseback transactions) or of any
capital  stock of such Person or a Subsidiary  of such Person and any net income
realized  as a result of changes in  accounting  principles  or the  application
thereof to such Person,  and (ii) the term  "Provision  for Taxes" shall mean an
amount equal to all taxes imposed on or measured by net income, whether Federal,
State, Provincial,



                                        3

<PAGE>



county or local,  and whether  foreign or domestic,  that are paid or payable by
any Person in respect of any period in accordance with GAAP.

         1.10 "Eligible  Accounts" shall mean Accounts created by Borrower which
are and  continue to be  acceptable  to Lender  based on the  criteria set forth
below. In general, Accounts shall be Eligible Accounts if:

               (a) such  Accounts  arise  from the actual and bona fide sale and
delivery  of goods by  Borrower  or  rendition  of  services  by Borrower in the
ordinary course of its business which  transactions  are completed in accordance
with the terms and provisions contained in any documents related thereto;

               (b) such  Accounts  are not unpaid after the lesser of sixty (60)
days past the original due date thereof or ninety (90) days from the date of the
original invoice for them;

               (c) such Accounts comply with the terms and conditions  contained
in Section 7.2(c) of this Agreement;

               (d)  such  Accounts  do not  arise  from  sales  on  consignment,
guaranteed  sale,  sale and return,  sale on  approval  (except for the right of
return  given to retail  customers  in the  ordinary  course of the  business of
Borrower in accordance with the then current return policy of Borrower,  so long
as such  policy is no more  favorable  to the retail  customer  in any  material
respect  than the policy in effect on the date  hereof),  or other  terms  under
which payment by the account debtor may be conditional or contingent;

               (e) such  Accounts  do not  constitute  the rights of Borrower to
payment from any credit card issuer,  credit card processor or other third party
arising  from sales of goods or  rendition  of  services to  customers  who have
purchased  such goods or services using a credit or debit card and such Accounts
do not constitute the rights of Borrower to payment from any credit card issuer,
credit  card  processor  or other  third  party in  connection  with the sale or
transfer  of Accounts  arising  pursuant  to the sale of goods or  rendition  of
services to customers who have  purchased  such goods or services using a credit
card or a debit card;

               (f) the chief executive office of the account debtor with respect
to such  Accounts is located in the United  States of  America,  or, at Lender's
option,  if  either:  (i) the  account  debtor  has  delivered  to  Borrower  an
irrevocable  letter of credit  issued or  confirmed  by a bank  satisfactory  to
Lender and payable  only in the United  States of America  and in U.S.  dollars,
sufficient to cover such Account,  in form and substance  satisfactory to Lender
and,  if  required  by Lender,  the  original  of such letter of credit has been
delivered  to Lender or Lender's  agent and the issuer  thereof  notified of the
assignment  of the  proceeds  of such  letter of credit to Lender,  or (ii) such
Account is subject to credit  insurance  payable to Lender  issued by an insurer
and on terms and in an amount  acceptable  to Lender,  or (iii) such  Account is
otherwise acceptable in all



                                        4

<PAGE>



respects to Lender  (subject to such lending  formula  with  respect  thereto as
Lender may determine);

               (g) such Accounts do not consist of progress  billings,  bill and
hold invoices or retainage  invoices,  except as to bill and hold  invoices,  if
Lender shall have received an agreement in writing from the account  debtor,  in
form  and  substance  satisfactory  to  Lender,   confirming  the  unconditional
obligation of the account debtor to take the goods related  thereto and pay such
invoice;

               (h) the account  debtor  with  respect to such  Accounts  has not
asserted a  counterclaim,  defense or  dispute  and does not have,  and does not
engage in transactions  which may give rise to, any right of setoff against such
Accounts  (but the portion of the Accounts of such  account  debtor in excess of
the amount at any time and from time to time owed by  Borrower  to such  account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);

               (i) there are no facts,  events or occurrences which would impair
the validity,  enforceability  or  collectability of such Accounts or reduce the
amount payable or delay payment thereunder;

               (j) such  Accounts are subject to the first  priority,  valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof,  subject to any liens except those
permitted in this Agreement;

               (k) neither the account debtor nor any officer or employee of the
account  debtor with respect to such  Accounts is an officer,  employee or other
Affiliate of Borrower;

               (l) the account debtors with respect to such Accounts are not any
foreign  government,   the  United  States  of  America,  any  State,  political
subdivision,  department,  agency or  instrumentality  thereof,  unless,  if the
account  debtor  is  the  United  States  of  America,   any  State,   political
subdivision,  department,  agency  or  instrumentality  thereof,  upon  Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State  or  local  law,  if  applicable,  has  been  complied  with  in a  manner
satisfactory to Lender;

               (m) there are no  proceedings  or actions which are threatened or
pending  against the account  debtors with respect to such Accounts  which could
reasonably  be expected  to result in any  material  adverse  change in any such
account debtor's financial condition;

               (n) such  Accounts  are not  owed by an  account  debtor  who has
Accounts  unpaid more than the lesser of sixty (60) days past the  original  due
date thereof or ninety (90) days from the date of the original invoice for them,
constituting more than fifty (50%) percent of the total Accounts of such account
debtor;




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<PAGE>



               (o)  such  Accounts  are  owed by  account  debtors  whose  total
indebtedness  to Borrower  does not exceed the credit limit with respect to such
account  debtors as  determined  by Borrower  from time to time in the  ordinary
course of business to the extent such credit limits are  satisfactory  to Lender
(but the  portion  of the  Accounts  not in excess of such  credit  limit may be
deemed Eligible Accounts); and

               (p) such Accounts are owed by account debtors deemed creditworthy
at all times by Lender, as determined in good faith by Lender.

General criteria for Eligible  Accounts may be established and revised from time
to time by Lender in good faith.  Any Accounts  which are not Eligible  Accounts
shall nevertheless be part of the Collateral.

         1.11 "Eligible  Inventory" shall mean Inventory  consisting of finished
goods held for resale in the ordinary  course of the  business of Borrower,  raw
materials and  work-in-process  for such finished  goods which are acceptable to
Lender based on the criteria set forth  below.  In general,  Eligible  Inventory
shall not include (a) components which are not part of finished goods; (b) spare
parts for equipment;  (c) packaging and shipping materials; (d) supplies used or
consumed in  Borrower's  business;  (e)  Inventory at premises  other than those
owned and  controlled  by  Borrower,  except if Lender  shall have  received  an
agreement in writing from the person in possession of such Inventory  and/or the
owner or operator of such premises in form and substance  satisfactory to Lender
acknowledging  Lender's  first  priority  security  interest  in the  Inventory,
waiving  security  interests and claims by such person against the Inventory and
permitting  Lender  access to, and the right to remain on, the premises so as to
exercise  Lender's  rights and remedies and otherwise deal with the  Collateral;
(f)  Inventory  subject  to a security  interest  or lien in favor of any person
other than Lender except those  permitted in this  Agreement;  (g) bill and hold
goods; (h) unserviceable, obsolete or slow moving Inventory; (i) Inventory which
is not subject to the first priority,  valid and perfected  security interest of
Lender; (j) returned, damaged and/or defective Inventory; (k) returned Inventory
that is not held for resale;  (l)  Inventory  to be  returned  to  vendors;  (m)
Inventory subject to deposits made by a customer for sales of Inventory that has
not been delivered to the extent that such  Inventory has been  identified to be
sold to such  customer;  and (n)  Inventory  purchased  or sold on  consignment.
General criteria for Eligible Inventory may be established and revised from time
to time by Lender in good faith.  Any Inventory which is not Eligible  Inventory
shall nevertheless be part of the Collateral.

         1.12 "Environmental  Laws" shall mean all Federal,  State,  Provincial,
county, district, local and foreign laws, rules,  regulations,  ordinances,  and
consent decrees relating to workplace health and safety,  hazardous  substances,
pollution and environmental  matters, as now or at any time hereafter in effect,
applicable to the business of Borrower and its facilities  (whether or not owned
by any of them), including laws relating to emissions,  discharges,  releases or
threatened releases of pollutants, contamination, chemicals, or hazardous, toxic
or dangerous  substances,  materials or wastes into the environment  (including,
without limitation, ambient air, surface



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water, ground water, land surface or subsurface strata) or otherwise relating to
the generation, manufacture,  processing, distribution, use, treatment, storage,
disposal,  transport  or handling of  pollutants,  contaminants,  chemicals,  or
hazardous, toxic or dangerous substances, materials or wastes.

         1.13  "Equipment"  shall mean all of Borrower's now owned and hereafter
acquired  equipment,  machinery,  computers  and computer  hardware and software
(whether  owned  or  licensed),   vehicles,  tools,  furniture,   fixtures,  all
attachments, accessions and property now or hereafter affixed thereto or used in
connection  therewith,  and  substitutions  and replacements  thereof,  wherever
located.

         1.14 "ERISA" shall mean the United States  Employee  Retirement  Income
Security Act of 1974, as the same now exists or may hereafter  from time to time
be amended,  modified,  recodified  or  supplemented,  together  with all rules,
regulations and interpretations thereunder or related thereto.

         1.15 "ERISA  Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b) and 414(c) of the
Code (and  Sections  414(m) or 414(o)  of the Code for  purposes  of  provisions
relating to Section 412 of the Code).

         1.16 "Event of Default"  shall mean the  occurrence or existence of any
event or condition described in Section 10.1 hereof.

         1.17 "Excess  Availability"  shall mean the amount,  as  determined  by
Lender,  calculated  at any time,  equal to: (a) the lesser of (i) the amount of
the Loans available to Borrower as of such time based on the applicable  lending
formulas  multiplied  by the Net Amount of  Eligible  Accounts  and the Value of
Eligible  Inventory,  as determined by Lender,  and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder and (ii)
the Maximum Credit, minus (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations,  plus (ii) the aggregate amount of all trade payables of
Borrower which are more than sixty (60) days past due as of such time.

         1.18 "Financing  Agreements" shall mean,  collectively,  this Agreement
and all notes, guarantees,  security agreements and other agreements,  documents
and  instruments  now or at any time  hereafter  executed  and/or  delivered  by
Borrower or any Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

         1.19 "GAAP" shall mean generally accepted accounting  principles in the
United  States of  America  as in  effect  from time to time as set forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute of Certified Public  Accountants and the statements and pronouncements
of  the  Financial  Accounting  Standards  Board  which  are  applicable  to the
circumstances as of the date of determination consistently applied.



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         1.20 "Hazardous Materials" any hazardous or toxic substances, materials
and wastes,  including,  without limitation,  petroleum,  flammable  explosives,
asbestos,   radioactive  materials,   biological   substances,   polychlorinated
biphenyls,  pesticides,  herbicides,  industrial slag, solvents and/or any other
substances,  materials  or wastes that are or become  regulated  as hazardous or
toxic under any Environmental Law.

         1.21 "Information  Certificate" shall mean the Information  Certificate
of Borrower  constituting  Exhibit A hereto containing material information with
respect  to  Borrower,  its  business  and  assets  provided  by or on behalf of
Borrower to Lender in connection  with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

         1.22  "Inventory"  shall mean all of Borrower's now owned and hereafter
existing or acquired  raw  materials,  work in process,  finished  goods and all
other inventory of whatsoever kind or nature, wherever located.

         1.23  "JBPCO"  shall  mean J.B.  Poindexter  & Co.,  Inc.,  a  Delaware
corporation, and its successors and assigns.

         1.24  "Leer"  shall mean Leer  Acquisition  Company,  Inc.,  a Delaware
corporation, and its successors and assigns.

         1.25  "Letter  of Credit  Accommodations"  shall  mean the  letters  of
credit,  acceptances with respect to drafts issued under such letters of credit,
merchandise  purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the  account of  Borrower  or any  Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower of its obligations to such issuer.

         1.26 "Loans" shall mean the loans now or hereafter made by Lender to or
for the benefit of Borrower on a revolving basis (involving advances, repayments
and readvances) as set forth in Section 2.1 hereof.

         1.27 "Management Services Agreement" shall mean the Management Services
Agreement,  dated  February 1, 1996,  by and between  Borrower and  Southwestern
Holdings, Inc., a Texas corporation,  as the same now exists or may hereafter be
amended, modified, restated, extended, renewed, restated or replaced.

         1.28 "Maximum Credit" shall mean the amount of $5,000,000.

         1.29 "Net Amount of Eligible  Accounts"  shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time  issued,  owing,  granted,  outstanding,  available  or claimed with
respect thereto.



                                        8

<PAGE>



         1.30  "Obligations"  shall  mean any and all  Loans,  Letter  of Credit
Accommodations and all other obligations,  liabilities and indebtedness of every
kind,  nature and description owing by Borrower to Lender and/or its Affiliates,
including  principal,  interest,  charges,  fees,  costs and  expenses,  however
evidenced,  whether as  principal,  surety,  endorser,  guarantor or  otherwise,
arising under this Agreement, whether now existing or hereafter arising, whether
arising  before,  during  or  after  the  initial  or any  renewal  term of this
Agreement or after the  commencement  of any case with respect to Borrower under
the United States Bankruptcy Code or any similar statute  (including the payment
of interest  and other  amounts  which  would  accrue and become due but for the
commencement of such case,  whether or not such amounts are allowed or allowable
in whole or in part in such  case),  whether  direct or  indirect,  absolute  or
contingent,  joint or several, due or not due, primary or secondary,  liquidated
or unliquidated, or secured or unsecured.

         1.31 "Obligor" shall mean any guarantor,  endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.

         1.32  "Payment Account" shall have the meaning set forth in Section 6.3
hereof.

         1.33 "Permitted  Holder" shall mean John B. Poindexter,  his executors,
administrators  or  similar  legal  representatives,  or  any  Person  which  is
controlled, directly or indirectly by any of the foregoing.

         1.34   "Person"   or   "person"   shall  mean  any   individual,   sole
proprietorship, partnership, corporation (including any corporation which elects
subchapter  S status  under the  Internal  Revenue  Code of 1986,  as  amended),
limited  liability  company,  limited  liability  partnership,  business  trust,
unincorporated  association,  joint stock  corporation,  trust, joint venture or
other entity or any  government  or any agency or  instrumentality  or political
subdivision thereof.

         1.35 "Plan" shall mean any employee  benefit plan within the meaning of
Section  3(2) of ERISA  that is  subject  to Title  IV of  ERISA  maintained  by
Borrower or any ERISA Affiliate.

         1.36  "Prime  Rate"  shall  mean the rate  from  time to time  publicly
announced  by  CoreStates  Bank,  N.A.,  or its  successors,  at its  office  in
Philadelphia,  Pennsylvania,  as its prime rate,  whether or not such  announced
rate is the best rate available at such bank.

         1.37 "Purchase  Agreements" shall mean,  individually and collectively,
the Asset Purchase  Agreement,  dated on or about the date hereof,  by and among
Borrower,  Seller,  William J. Avery, Sr. and Sara A. Avery, together with bills
of sale,  quitclaim deeds,  assignment and assumption  agreements and such other
instruments  of transfer as are  referred to therein and all side  letters  with
respect thereto,  and all agreements,  documents and instruments executed and/or
delivered in  connection  therewith,  as all of the  foregoing  now exist or may
hereafter be amended,  modified,  supplemented,  extended,  renewed, restated or
replaced; provided, that, the term



                                        9

<PAGE>



"Purchase  Agreements"  as used herein  shall not include any of the  "Financing
Agreements" as such term is defined herein.

         1.38  "Purchased  Assets"  shall mean all of the assets and  properties
acquired by Borrower from Seller pursuant to the Purchase Agreements.

         1.39 "Receivables" shall mean all present and future (a) Accounts;  (b)
rights of Borrower to payment from any credit card issuer, credit card processor
or other third party  arising  from sales of goods or  rendition  of services to
customers  who have  purchased  such goods or services  using a credit card or a
debit card and rights of Borrower to payment from any credit card issuer, credit
card  process or other  third party in  connection  with the sale or transfer of
Accounts  arising  pursuant  to the sale of goods or  rendition  of  services to
customers  who have  purchased  such goods or services  using a credit card or a
debit card; (c) chattel paper,  documents and  instruments (i) which evidence or
relate to Accounts  and  Inventory  and  including  documents  of title or other
documents  representing  them, or (ii) which  evidence or relate to  instruments
evidencing  indebtedness  arising  pursuant  to  Accounts  or any  of the  other
Collateral;  and (d) rights of  Borrower to payment  arising  pursuant to loans,
advances or other financial  accommodations  made or provided by Borrower to any
other person.

         1.40 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements,  invoices, ledger
cards, bills of lading and other shipping evidence, statements,  correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor,  together with the tapes,  disks,  diskettes and other data and software
storage  media and  devices,  file  cabinets  or  containers  in or on which the
foregoing  are stored  (including  any rights of  Borrower  with  respect to the
foregoing maintained with or by any other person).

         1.41 Securities Exchange Act" shall mean the Securities Exchange Act of
1934,  as the same now  exists or may  hereafter  from time to time be  amended,
modified,  recodified or supplemented,  together with all rules, regulations and
interpretations thereunder or related thereto.

         1.42 "Seller" shall mean Midwest Truck After Market,  Inc., an Oklahoma
corporation, and its successors and assigns.

         1.43  "Subsidiary"  shall mean any  corporation  of which  fifty  (50%)
percent or more of the outstanding  securities of any class or classes  thereof,
as to which the holders thereof are ordinarily, in the absence of contingencies,
entitled to elect a majority of the  directors  (or Persons  performing  similar
functions) of such corporation, is now hereafter directly or indirectly (through
one or more  intermediaries)  owned by  Borrower  and/or  any one or more of its
Subsidiaries.




                                       10

<PAGE>



         1.44 "Value" shall mean,  as  determined by Lender in good faith,  with
respect to  Inventory,  the lower of (a) cost  computed on a  first-in-first-out
basis in accordance with GAAP or (b) market value.


SECTION 2.     CREDIT FACILITIES

         2.1 Loans.

               (a)  Subject  to and  upon the  terms  and  conditions  contained
herein,  Lender  agrees to make Loans to  Borrower  from time to time in amounts
requested by Borrower up to the amount equal to the sum of:

                     (i)  the  lesser of (A)  eighty  (80%)  percent  of the Net
                          Amount of Eligible Accounts and (B) $1,000,000, plus

                     (ii)  sixty   (60%)   percent  of  the  Value  of  Eligible
Inventory, minus

                     (iii) any Availability Reserves.

               (b) Lender may, in its  discretion,  from time to time,  upon not
less than five (5) days prior notice to Borrower, (i) reduce the lending formula
with respect to Eligible  Accounts to the extent that Lender  determines in good
faith that:  (A) the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate amount of reductions in Accounts other than as
a result of payments  in cash to (2) the  aggregate  amount of total  sales) has
increased in any material  respect or may be reasonably  anticipated to increase
in  any  material   respect  above  historical   levels,   or  (B)  the  general
creditworthiness of account debtors has declined in any material respect or (ii)
reduce the lending  formula(s) with respect to Eligible  Inventory to the extent
that  Lender  determines  in good  faith  that:  (A) the  number  of days of the
turnover of the Inventory for any period has changed in any material  respect or
(B) the liquidation  value of the Eligible  Inventory,  or any category thereof,
has  decreased,  or (C) the  nature  and  quality  or mix of the  Inventory  has
deteriorated so as to adversely affect the Value of the Inventory or the ability
of Lender to realize  thereon.  In  determining  whether  to reduce the  lending
formula(s), Lender may consider events, conditions, contingencies or risks which
are also considered in determining  Eligible Accounts,  Eligible Inventory or in
establishing Availability Reserves.

               (c) Except in Lender's  discretion,  (i) the aggregate  amount of
the Loans and Letter of Credit Accommodations  outstanding at any time shall not
exceed the Maximum Credit and (ii) the aggregate amount of Loans  outstanding at
any  time  based  on  Eligible   Inventory   consisting  of  raw  materials  and
work-in-process  shall not exceed  $100,000.  In the event that the  outstanding
amount of any component of the Loans, or the aggregate amount of the outstanding
Loans and Letter of Credit  Accommodations,  exceed the amounts  available under
the lending  formulas,  the  sublimits for Letter of Credit  Accommodations  set
forth in Section 2.2(d) or the Maximum



                                       11

<PAGE>



Credit, as applicable, such event shall not limit, waive or otherwise affect any
rights of Lender in that  circumstance  or on any future  occasions and Borrower
shall,  upon  demand  by  Lender,  which may be made at any time or from time to
time,  immediately  repay to Lender the entire amount of any such excess(es) for
which payment is demanded.

         2.2   Letter of Credit Accommodations.

               (a)  Subject  to and  upon the  terms  and  conditions  contained
herein,  at the  request of  Borrower,  Lender  agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions  acceptable  to Lender and the issuer  thereof.  Any payments made by
Lender to any issuer  thereof  and/or  related  parties in  connection  with the
Letter of Credit  Accommodations  shall constitute  additional Loans to Borrower
pursuant to this Section 2.

               (b) In addition to any charges,  fees or expenses  charged by any
bank or issuer in connection with the Letter of Credit Accommodations,  Borrower
shall pay to Lender a letter of credit fee at a rate  equal to two (2%)  percent
per  annum  on  the  daily   outstanding   balance   of  the  Letter  of  Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option,  without notice, at
a rate equal to four (4%)  percent per annum on such daily  outstanding  balance
for: (i) the period from and after the date of termination or non-renewal hereof
until  Lender  has  received   full  and  final   payment  of  all   Obligations
(notwithstanding  entry of a judgment against Borrower) and (ii) the period from
and after the date of the  occurrence of an Event of Default for so long as such
Event of Default is continuing  as  determined by Lender.  Such letter of credit
fee shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.

               (c) No Letter of Credit  Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Loans available to Borrower  (subject to the Maximum Credit and any Availability
Reserves)  are equal to or greater  than:  (i) if the proposed  Letter of Credit
Accommodation is for the purpose of purchasing  Eligible  Inventory,  the sum of
(A) the percentage equal to one hundred (100%) percent minus the then applicable
percentage set forth in Section  2.1(a)(ii)  above of the Value of such Eligible
Inventory,  plus  (B)  freight,  taxes,  duty and  other  amounts  which  Lender
estimates  must be paid in connection  with such  Inventory upon arrival and for
delivery to one of Borrower's locations for Eligible Inventory within the United
States of America and (ii) if the proposed Letter of Credit Accommodation is for
any other  purpose,  an amount equal to one hundred  (100%)  percent of the face
amount thereof and all other  commitments  and  obligations  made or incurred by
Lender with respect thereto.  Effective on the issuance of each Letter of Credit
Accommodation,  an  Availability  Reserve shall be established in the applicable
amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).




                                       12

<PAGE>



               (d) Except in Lender's discretion,  the amount of all outstanding
Letter of Credit  Accommodations  and all other commitments and obligations made
or  incurred  by Lender in  connection  therewith  shall not at any time  exceed
$500,000.  At any  time an  Event  of  Default  exists  or has  occurred  and is
continuing,  upon Lender's request, Borrower will either furnish cash collateral
to secure the  reimbursement  obligations  to the issuer in connection  with any
Letter of Credit  Accommodations  or furnish cash  collateral  to Lender for the
Letter  of  Credit  Accommodations,  and in either  case,  the  Loans  otherwise
available to Borrower  shall not be reduced as provided in Section 2.2(c) to the
extent of such cash collateral.

               (e) Borrower  shall  indemnify and hold Lender  harmless from and
against any and all losses,  claims,  damages,  liabilities,  costs and expenses
which  Lender  may  suffer  or incur in  connection  with any  Letter  of Credit
Accommodations  and any  documents,  drafts  or  acceptances  relating  thereto,
including any losses, claims,  damages,  liabilities,  costs and expenses due to
any action  taken by any issuer or  correspondent  with respect to any Letter of
Credit  Accommodation  except  as a result of the gross  negligence  or  willful
misconduct of Lender as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.  Borrower assumes all risks with respect to the
acts or  omissions of the drawer  under or  beneficiary  of any Letter of Credit
Accommodation  and for such purposes the drawer or  beneficiary  shall be deemed
Borrower's  agent.  Borrower  assumes  all risks  for,  and  agrees to pay,  all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject  to any  Letter of Credit  Accommodations  or any  documents,  drafts or
acceptances thereunder.  Borrower hereby releases and holds Lender harmless from
and against any acts, waivers,  errors,  delays or omissions,  whether caused by
Borrower,  by any  issuer or  correspondent  or  otherwise  with  respect  to or
relating to any Letter of Credit  Accommodation.  The provisions of this Section
2.2(e)  shall  survive the payment of the  Obligations  and the  termination  or
non-renewal of this Agreement.

               (f) Nothing  contained  herein  shall be deemed or  construed  to
grant  Borrower  any right or  authority  to pledge  the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit  Accommodation  provided by an issuer other than Lender unless Lender has
duly  executed and  delivered to such issuer the  application  or a guarantee or
indemnification in writing with respect to such Letter of Credit  Accommodation.
Borrower shall be bound by any  interpretation  made in good faith by Lender, or
any other  issuer or  correspondent  under or in  connection  with any Letter of
Credit  Accommodation  or  any  documents,  drafts  or  acceptances  thereunder,
notwithstanding   that  such   interpretation   may  be  inconsistent  with  any
instructions  of Borrower.  Lender shall have the sole and  exclusive  right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has  occurred  and is  continuing,  (A) approve or resolve any  questions  of
non-compliance  of  documents,  (B) give any  instructions  as to  acceptance or
rejection of any documents or goods or (C) execute any and all  applications for
steamship or airway guaranties,  indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts,  acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of  the  terms  or  conditions  of any of the  applications,  Letter  of  Credit
Accommodations, or documents, drafts or acceptances



                                       13

<PAGE>



thereunder or any letters of credit included in the Collateral.  Lender may take
such actions either in its own name or in Borrower's name.

               (g) Any  rights,  remedies,  duties  or  obligations  granted  or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or  correspondent  in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed  to have  been  undertaken  by  Borrower  to  Lender  and to apply in all
respects to Borrower.

         2.3 Availability  Reserves.  All Loans otherwise  available to Borrower
pursuant to the  lending  formulas  and subject to the Maximum  Credit and other
applicable  limits  hereunder shall be subject to Lender's  continuing  right to
establish and revise Availability Reserves. Without limiting any other rights or
remedies of Lender under this Agreement or any of the other Financing Agreements
with respect to the establishment of Availability Reserves or otherwise,  Lender
may establish and revise Availability Reserves to reflect: (a) amounts due or to
become due in respect of sales,  use and/or  withholding  taxes;  (b) any rental
payments,  service  charges or other  amounts due to lessors of real or personal
property  to the extent  Inventory  or Records  are located in or on property or
such Records are needed to monitor or otherwise  deal with the Collateral or (c)
amounts owing by Borrower to credit card issuers or credit card processors.


SECTION 3.     INTEREST AND FEES

         3.1 Interest.

               (a)  Borrower  shall pay to Lender  interest  on the  outstanding
principal  amount  of the  Loans  at the  rate of one and  one-quarter  (1 1/4%)
percent per annum in excess of the Prime Rate,  except that, at Lender's option,
without  notice,  Borrower shall pay to Lender interest at the rate of three and
one-quarter  (3 1/4%) percent per annum in excess of the Prime Rate:  (i) on the
Loans for (A) the period from and after the date of  termination  or non-renewal
hereof until such time as Lender has received full and final payment of all such
Obligations  (notwithstanding  entry of any judgment against Borrower),  and (B)
the period from and after the date of the  occurrence of an Event of Default for
so long as such Event of Default is  continuing as determined by Lender and (ii)
on the  Loans at any time  outstanding  in excess of the  amounts  available  to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without  Lender's  knowledge  or consent and whether  made before or after an
Event of Default).

               (b)  Interest  shall be payable by Borrower to Lender  monthly in
arrears  not  later  than the  first  day of each  calendar  month  and shall be
calculated  on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an



                                       14

<PAGE>



amount  equal to each  increase or decrease in the Prime Rate  effective  on the
first day of the month  after any change in such Prime  Rate is  announced.  The
increase or decrease  shall be based on the Prime Rate in effect on the last day
of the month in which any such change occurs. All interest accruing hereunder on
and after an Event of Default or  termination  or  non-renewal  hereof  shall be
payable on demand.  In no event shall charges  constituting  interest payable by
Borrower to Lender  exceed the maximum  amount or the rate  permitted  under any
applicable law or regulation,  and if any part or provision of this Agreement is
in contravention of any such law or regulation,  such part or provision shall be
deemed amended to conform thereto.

         3.2  Closing  Fee.  Borrower  shall pay to Lender as a closing  fee the
amount  of  $50,000,  which  shall be fully  earned  as of the date  hereof  and
$16,666.66  of which shall be payable on the date  hereof,  $16,666.66  of which
shall be payable on the first anniversary of the date hereof,  and $16,666.67 of
which shall be payable on the second  anniversary of the date hereof,  provided,
that, such amount shall become  immediately  due and payable,  without notice or
demand,  at Lender's option,  upon the occurrence of an Event of Default or upon
the termination or non-renewal hereof.

         3.3 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $2,000 in respect of Lender's  services for each month (or
part thereof) while this Agreement  remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof for the month ending November 30, 1997
and on the first day of each month thereafter commencing on December 1, 1997.

         3.4 Unused  Line Fee.  Borrower  shall pay to Lender  monthly an unused
line  fee at a rate  equal  to  one-quarter  (1/4%)  percent  per  annum  of the
difference  between (a) the average monthly principal balance of the outstanding
Loans and Letter of Credit Accommodations and (b) the Maximum Credit, while this
Agreement is in effect and for so long  thereafter as any of the Obligations are
outstanding,  which fee  shall be  payable  on the  first  day of each  month in
arrears.


SECTION 4.     CONDITIONS PRECEDENT

         4.1  Conditions  Precedent  to  Initial  Loans  and  Letter  of  Credit
Accommodations.  Each of the following is a condition precedent to Lender making
the initial  Loans and  providing  the initial  Letter of Credit  Accommodations
hereunder:

               (a)  Lender   shall  have   received,   in  form  and   substance
satisfactory  to Lender,  evidence that the Purchase  Agreements  have been duly
executed  and  delivered  by and to the  appropriate  parties  thereto  and  the
transactions  contemplated under the terms of the Purchase  Agreements have been
consummated prior to or contemporaneously with the execution of this Agreement;




                                       15

<PAGE>



               (b)  Lender   shall  have   received,   in  form  and   substance
satisfactory  to Lender,  a pro-forma  balance sheet of Borrower  reflecting the
initial transactions contemplated hereunder,  including, but not limited to, (i)
the  consummation  of the  acquisition of the Purchased  Assets by Borrower from
Seller and the other  transactions  contemplated by the Purchase  Agreements and
(ii) the  Loans  and  Letter  of  Credit  Accommodations  provided  by Lender to
Borrower on the date hereof and the use of the proceeds of the initial  Loans as
provided herein,  accompanied by a certificate,  dated as of the date hereof, of
the Vice  President  of  Borrower  stating  that such  pro-forma  balance  sheet
represents the reasonable,  good faith opinion of such officer as to the subject
matter thereof as of the date of such certificate;

               (c)  Lender   shall  have   received,   in  form  and   substance
satisfactory to Lender, the agreement of the Seller consenting to the collateral
assignment  by Borrower to Lender of all of  Borrower's  rights and remedies and
claims for damages or other relief under the  Purchase  Agreements  and granting
Lender such other rights as Lender may require,  duly  authorized,  executed and
delivered by Seller;

               (d) Lender shall have received,  in form and substance reasonably
satisfactory to Lender,  the intercreditor  and subordination  agreement between
Lender and Seller,  as  acknowledged  and agreed to by Borrower,  providing for,
among other things,  the terms of the  subordination  in right of payment of all
amounts at any time owing by Borrower to Seller to the indefeasible  payment and
satisfaction of the Obligations and the subordination of the security  interests
of Seller in any of the  assets  and  properties  of  Borrower  to the  security
interests of Lender in the assets and properties of Borrower,  duly  authorized,
executed and delivered by Seller;

               (e)  Lender   shall  have   received,   in  form  and   substance
satisfactory  to Lender,  evidence  that  Lender has valid  perfected  and first
priority  security  interests  in and liens  upon the  Collateral  and any other
property which is intended to be security for the  Obligations,  subject only to
the security  interests  and liens  permitted  herein or in the other  Financing
Agreements;

               (f) all requisite  corporate action and proceedings in connection
with this Agreement and the other Financing  Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents,  including  records of requisite  corporate  action and
proceedings  which  Lender may have  requested  in  connection  therewith,  such
documents  where  requested  by  Lender  or  its  counsel  to  be  certified  by
appropriate corporate officers or governmental authorities;

               (g) no material  adverse change shall have occurred in the assets
or business of Borrower since the date of Lender's latest field  examination and
no change or event  shall  have  occurred  which  would  impair  the  ability of
Borrower or any Obligor to perform its obligations hereunder or under any of the
other  Financing  Agreements  to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;




                                       16

<PAGE>



               (h) Lender shall have completed a field review of the Records and
such other  information  with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrower,  the results of which shall
be  satisfactory  to Lender,  not more than three (3) Business Days prior to the
date hereof;

               (i)  Lender   shall  have   received,   in  form  and   substance
satisfactory  to  Lender,  all  consents,  waivers,  acknowledgments  and  other
agreements  from third persons  which Lender may deem  necessary or desirable in
order to permit,  protect and perfect its  security  interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the  other  Financing   Agreements,   including   acknowledgements  by  lessors,
mortgagees and  warehousemen of Lender's  security  interests in the Collateral,
waivers by such persons of any security interests, liens or other claims by such
persons to the Collateral and  agreements  permitting  Lender access to, and the
right to remain on, the  premises  to  exercise  its  rights  and  remedies  and
otherwise deal with the Collateral;

               (j)  Borrower  shall have  established  the Blocked  Accounts and
Lender shall have received,  in form and substance  satisfactory to Lender,  all
agreements  with the depository  banks and Borrower with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof,  duly authorized,
executed and delivered by such depository banks and Borrower;

               (k) Lender shall have  received  evidence,  in form and substance
satisfactory  to  Lender,  that  Borrower  has (i)  directed  the banks at which
Borrower  maintains deposit accounts for the initial receipt of cash, checks and
other items from  Borrower's  retail store locations to transfer all immediately
available funds deposited in such bank only to the Blocked  Accounts as required
pursuant  to Section  6.3  hereof or as  otherwise  directed  by Lender and (ii)
notified  such banks of the  security  interests of Lender in such funds and the
other Collateral;

               (l) Lender shall have  received  evidence of  insurance  and loss
payee endorsements  required hereunder and under the other Financing Agreements,
in form and substance  reasonably  satisfactory to Lender,  and  certificates of
insurance policies and/or  endorsements naming Lender as loss payee with respect
to the Collateral ;

               (m) Lender shall have received,  in form and substance reasonably
satisfactory  to Lender,  the opinion  letter of  counsel(s)  to  Borrower  with
respect to the Purchase  Agreements,  the Financing  Agreements and the security
interests  and liens of Lender  with  respect to the  Collateral  and such other
matters as Lender may request;

               (n)  the  other  Financing  Agreements  and all  instruments  and
documents  hereunder and thereunder  shall have been duly executed and delivered
to Lender, in form and substance reasonably satisfactory to Lender.

      4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the  following is an  additional  condition  precedent to Lender  making
Loans and/or providing



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<PAGE>



Letter of Credit  Accommodations  to Borrower,  including  the initial Loans and
Letter of  Credit  Accommodations  and any  future  Loans  and  Letter of Credit
Accommodations:

               (a) all  representations  and warranties  contained herein and in
the  other  Financing  Agreements  shall be true  and  correct  in all  material
respects with the same effect as though such  representations and warranties had
been made on and as of the date of the  making  of each  such Loan or  providing
each such Letter of Credit  Accommodation and after giving effect thereto except
to the extent that such representation and warranties expressly relate solely to
an earlier date (in which case such  representations  and warranties  shall have
been true and accurate on and as of such earlier date); and

               (b) no Event of Default  and no event or  condition  which,  with
notice or passage of time or both, would  constitute an Event of Default,  shall
exist or have  occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.


SECTION 5.     GRANT OF SECURITY INTEREST

         5.1 To secure  payment and  performance  of all  Obligations,  Borrower
hereby grants to Lender a continuing  security  interest in, a lien upon,  and a
right of set off  against,  and  hereby  assigns  to  Lender  as  security,  the
following  property and interests in property of Borrower,  whether now owned or
hereafter  acquired  or  existing,  and  wherever  located  (collectively,   the
"Collateral"):

         (a)   all Receivables;

         (b) all present  and future  contract  rights and  general  intangibles
(including  tax  and  duty  refunds,   registered  and   unregistered   patents,
trademarks,  service  marks,  copyrights,  trade  names,  applications  for  the
foregoing, trade secrets, goodwill, processes,  drawings,  blueprints,  customer
lists,  licenses,  whether as licensor or  licensee,  choses in action and other
claims and  acceptances  and  guarantees)  in connection  with or related to the
Receivables and any of the other Collateral;

         (c) all right,  title and interest of Borrower under the Asset Purchase
Agreement by and among  Debtor,  Midwest Truck After  Market,  Inc.,  William J.
Avery, Sr. and Sara A. Avery and related agreements,  documents and instruments,
including,  without limitation,  all rights of Borrower to receive monies due or
to become due thereunder or in connection  therewith,  all rights of Borrower to
indemnification  and  claims  for  damages  or  other  relief  pursuant  to such
agreement or related agreements,  all rights of Borrower to perform and exercise
all remedies thereunder and to require performance by the other parties thereto,
and all proceeds, collections, recoveries and rights of subrogation with respect
to the foregoing;




                                       18

<PAGE>



         (d) all present and future monies,  securities and the other investment
property,  credit  balances,  deposits,  deposit  accounts and other property of
Borrower  now or  hereafter  held or  received by or in transit to Lender or its
Affiliates  or at any  other  depository  or other  institution  from or for the
account of Borrower,  whether for safekeeping,  pledge,  custody,  transmission,
collection or otherwise,  and all present and future liens,  security interests,
rights,  remedies,  title and interest in, to and in respect of Receivables  and
other  Collateral,  including  (i)  rights and  remedies  under or  relating  to
guaranties, contracts of suretyship, letters of credit, banker's acceptances and
credit and other  insurance  related  to the other  Collateral,  (ii)  rights of
stoppage in transit,  replevin,  repossession,  reclamation and other rights and
remedies of an unpaid vendor,  lienor or secured party, (iii) goods described in
invoices, documents,  contracts,  instruments,  credit card sales drafts, credit
card sales  slips or charge  slips or  receipts  and other  forms of daily store
receipts, with respect to, or otherwise representing or evidencing,  Receivables
or other Collateral,  including  returned,  repossessed and reclaimed goods, and
(iv) deposits by and property of account  debtors or other persons  securing the
obligations of account debtors;

         (e)   all Inventory;

         (f)   all Records; and

         (g) all products and proceeds of the foregoing,  in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.

         5.2  Notwithstanding  anything to the contrary contained in Section 5.1
above,  the  types or items of  Collateral  shall  not  include  any  rights  or
interests in any contract,  lease, permit, license, charter or license agreement
covering personal property, as such, if under the terms of such contract, lease,
permit,  license,  charter or license agreement,  or applicable law with respect
thereto,  the valid grant of a security  interest  or lien  therein to Lender is
prohibited and such  prohibition has not been or is not waived or the consent of
the other party to such contract,  lease,  permit,  license,  charter or license
agreement has not been or is not otherwise obtained or under applicable law such
prohibition cannot be waived;  provided,  that, the foregoing exclusion shall in
no way be construed  (a) to apply if such  prohibition  is  unenforceable  under
Section 9-318 of the UCC or other  applicable law or (b) so as to limit,  impair
or otherwise affect Lender's unconditional  continuing security interests in and
liens upon any rights or  interests of Borrower in or to monies due or to become
due  under  any such  contract,  lease,  permit,  license,  charter  or  license
agreement (including, without limitation, any Accounts or other Receivables).


SECTION 6.     COLLECTION AND ADMINISTRATION

         6.1  Borrower's  Revolving  Loan Account.  Lender shall maintain one or
more loan  account(s)  on its books in which  shall be  recorded  (a) all Loans,
Letter of Credit  Accommodations  and other Obligations and the Collateral,  (b)
all payments made by or on



                                       19

<PAGE>



behalf of Borrower and (c) all other appropriate  debits and credits as provided
in this Agreement,  including fees, charges,  costs, expenses and interest.  All
entries  in the  loan  account(s)  shall  be made in  accordance  with  Lender's
customary practices as in effect from time to time.

         6.2 Statements.  Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement,  including principal,
interest,  fees,  costs and expenses.  Each such  statement  shall be subject to
subsequent  adjustment by Lender but shall, absent manifest errors or omissions,
be considered  correct and deemed accepted by Borrower and conclusively  binding
upon Borrower as an account  stated except to the extent that Lender  receives a
written  notice from  Borrower of any specific  exceptions  of Borrower  thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above,  the balance in Borrower's loan account(s)  shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.

         6.3   Collection of Accounts.

               (a)  Borrower  shall  establish  and  maintain,  at its  expense,
deposit account  arrangements and merchant payment  arrangements  with the banks
set forth on  Schedule  6.3 hereto  and after  prior  written  notice to Lender,
subject to Section 9.13,  such other banks as Borrower may  hereafter  select as
are acceptable to Lender.  The banks set forth on Schedule 6.3 constitute all of
the banks with whom  Borrower  has deposit  account  arrangements  and  merchant
payment  arrangements  as of the date hereof and identifies  each of the deposit
accounts at such banks to a retail  location of Borrower or otherwise  describes
the nature of the use of such deposit account by Borrower.

                     (i)  Borrower shall deposit all proceeds from sales of
Inventory in every form,  including,  without limitation,  cash, checks,  credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store  receipts,  from each retail  store  location of Borrower on each
Business Day into the deposit  accounts of Borrower used solely for such purpose
and  identified to each retail store  location as set forth on Schedule 6.3. All
such funds  deposited into the separate  deposit  accounts shall be sent by wire
transfer on a daily basis and all other proceeds of Collateral  shall be sent by
wire transfer,  to the Blocked Accounts as provided in Section 6.3(a)(ii) below.
Borrower  shall  irrevocably  authorize  and  direct  in  writing,  in form  and
substance  satisfactory  to Lender,  each of the banks into which  proceeds from
sales of Inventory  from each retail store  location of Borrower are at any time
deposited as provided above to send all funds  deposited in such account by wire
transfer  on a daily  basis to the  Blocked  Accounts.  Such  authorization  and
direction shall not be rescinded,  revoked or modified without the prior written
consent of Lender.

                     (ii) Borrower shall establish and maintain, at its expense,
deposit  accounts  with such banks as are  acceptable  to Lender  (the  "Blocked
Accounts")  into which  Borrower  shall  promptly  either  cause all  amounts on
deposit in its deposit accounts used by each retail store



                                       20

<PAGE>



location  to be sent as  provided  in Section  6.3(a)(i)  above or shall  itself
deposit or cause to be  deposited  all  proceeds  from sales of  Inventory,  all
amounts  payable to Borrower from credit card issuers and credit card processors
and all other  proceeds of Collateral.  The banks at which the Blocked  Accounts
are  established   shall  enter  into  an  agreement,   in  form  and  substance
satisfactory  to Lender,  providing  that all items received or deposited in the
Blocked  Accounts are the property of Lender,  that the  depository  bank has no
lien upon, or right of setoff against, the Blocked Accounts,  the items received
for deposit therein,  or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer,  in immediately  available
funds,  on a daily  basis,  all funds  received  or  deposited  into the Blocked
Accounts  to such  bank  account  of  Lender  as  Lender  may from  time to time
designate for such purpose ("Payment Account"). Borrower agrees that all amounts
deposited in such  Blocked  Accounts or other funds  received  and  collected by
Lender,  whether as proceeds of inventory or other Collateral or otherwise shall
be the property of Lender.

               (b) For purposes of calculating the amount of the Loans available
to Borrower,  such payments will be applied  (conditional upon final collection)
to the  Obligations  on the  Business  Day of receipt  by Lender of  immediately
available funds in the Payment Account provided such payments and notice thereof
are received in  accordance  with Lender's  usual and customary  practices as in
effect from time to time and within  sufficient  time to credit  Borrower's loan
account on such day, and if not, then on the next Business Day. For the purposes
of  calculating  interest  on the  Obligations,  such  payments  or other  funds
received will be applied  (conditional upon final collection) to the Obligations
one (1)  Business Day  following  the date of receipt of  immediately  available
funds by Lender in the Payment Account provided such payments or other funds and
notice  thereof are received in  accordance  with  Lender's  usual and customary
practices  as in effect from time to time and within  sufficient  time to credit
Borrower's loan account on such day, and if not, then on the next Business Day.

               (c) Borrower and all of its Subsidiaries,  employees,  agents and
other Affiliates shall,  acting as trustee for Lender,  receive, as the property
of Lender,  any monies,  checks,  notes,  credit card sales drafts,  credit card
sales or charge slips or receipts, notes, drafts, all forms of store receipts or
any other payment  relating to and/or  proceeds of Accounts or other  Collateral
which come into their  possession  or under their control and  immediately  upon
receipt thereof,  shall deposit or cause the same to be deposited in the Blocked
Accounts,  or remit  the same or cause  the  same to be  remitted,  in kind,  to
Lender.  In no event shall the same be  commingled  with  Borrower's  own funds.
Borrower  agrees to  reimburse  Lender on demand for any amounts owed or paid to
any bank at which a Blocked  Account is  established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or  indemnification  of such bank or person. The obligation
of Borrower to reimburse  Lender for such  amounts  pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.

         6.4 Payments.  All Obligations  shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Lender may apply



                                       21

<PAGE>



payments  received  or  collected  from  Borrower or for the account of Borrower
(including  the monetary  proceeds of  collections  or of  realization  upon any
Collateral) to such of the  Obligations,  whether or not then due, in such order
and manner as Lender determines.  At Lender's option,  all principal,  interest,
fees,  costs,  expenses and other charges  provided for in this Agreement or the
other  Financing  Agreements may be charged  directly to the loan  account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free and
clear of, and without deduction or withholding for or on account of, any setoff,
counterclaim,   defense,  duties,  taxes,  levies,  imposts,  fees,  deductions,
withholding,  restrictions  or  conditions  of any kind. If after receipt of any
payment  of, or  proceeds  of  Collateral  applied to the payment of, any of the
Obligations,  Lender is required to surrender or return such payment or proceeds
to any Person for any reason,  then the Obligations  intended to be satisfied by
such payment or proceeds  shall be  reinstated  and continue and this  Agreement
shall  continue in full force and effect as if such  payment or proceeds had not
been  received by Lender.  Borrower  shall be liable to pay to Lender,  and does
hereby  indemnify  and hold Lender  harmless  for the amount of any  payments or
proceeds  surrendered  or  returned.  This  Section 6.4 shall  remain  effective
notwithstanding  any  contrary  action  which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

         6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit  Accommodations  based upon telephonic or other
instructions  received  from anyone  purporting  to be an officer of Borrower or
other  authorized  person or, at the  discretion  of  Lender,  if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations  hereunder shall specify the date on which the requested  advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested  Loan.  Requests  received after
11:00 a.m. New York City time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans and
Letter of Credit  Accommodations  under  this  Agreement  shall be  conclusively
presumed  to have been made to, and at the  request of and for the  benefit  of,
Borrower  when  deposited  to the credit of Borrower or  otherwise  disbursed or
established  in accordance  with the  instructions  of Borrower or in accordance
with the terms and conditions of this Agreement.

         6.6 Use of  Proceeds.  Borrower  shall use the initial  proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender  on or  about  the  date  hereof  and (b)  costs,  expenses  and  fees in
connection  with the  preparation,  negotiation,  execution and delivery of this
Agreement and the other Financing Agreements.  All other Loans made or Letter of
Credit Accommodations  provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper  corporate  purposes of Borrower not  otherwise  prohibited  by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of  purchasing  or carrying  any margin  security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase



                                       22

<PAGE>



or carry any margin  security or for any other  purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System, as amended.


SECTION 7.     COLLATERAL REPORTING AND COVENANTS

         7.1  Collateral  Reporting.  Borrower  shall  provide  Lender  with the
following  documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts,  sales made, credits issued and cash
received;  (b) on a monthly  basis or more  frequently  beginning  five (5) days
after Lender's request, (i) perpetual inventory reports,  (ii) inventory reports
by category and (iii) agings of accounts payable, (c) upon Lender's request, (i)
copies of customer statements and credit memos,  remittance advices and reports,
and copies of deposit  slips and bank  statements,  (ii) copies of shipping  and
delivery documents,  and (iii) copies of purchase orders,  invoices and delivery
documents for Inventory acquired by Borrower;  (d) agings of accounts receivable
on a monthly basis or more frequently as Lender may request;  and (e) such other
reports as to the  Collateral  as Lender shall request from time to time. If any
of Borrower's records or reports of the Collateral are prepared or maintained by
an  accounting  service,  contractor,  shipper or other agent,  Borrower  hereby
irrevocably  authorizes  such service,  contractor,  shipper or agent to deliver
such records,  reports,  and related  documents to Lender and to follow Lender's
instructions  with  respect  to  further  services  at any time that an Event of
Default exists or has occurred and is continuing.

         7.2   Accounts Covenants.

               (a) Borrower  shall notify  Lender  promptly of: (i) any material
delay  in  Borrower's  performance  of any of its  obligations  to any  material
account  debtor or the assertion of any material  claims,  offsets,  defenses or
counterclaims by any account debtor,  or any disputes with account  debtors,  or
any  settlement,  adjustment or compromise  thereof,  (ii) all material  adverse
information  relating to the financial condition of any account debtor and (iii)
any event or circumstance  which, to Borrower's  knowledge would cause Lender to
consider any then existing Accounts as no longer constituting Eligible Accounts.
No  credit,  discount,  allowance  or  extension  or  agreement  for  any of the
foregoing  shall be granted to any  account  debtor  without  Lender's  consent,
except in the ordinary course of Borrower's business in accordance with its then
current  practices  and policies (so long as such  practices and policies are no
more  favorable to such account  debtor or other person in any material  respect
than those in effect on the date hereof).  So long as no Event of Default exists
or has occurred and is continuing,  Borrower shall settle,  adjust or compromise
any claim, offset,  counterclaim or dispute with any account debtor. At any time
that an Event of Default exists or has occurred and is continuing, Lender shall,
at its option,  have the exclusive  right to settle,  adjust or  compromise  any
claim,  offset,  counterclaim  or  dispute  with  account  debtors  or grant any
credits, discounts or allowances.




                                       23

<PAGE>



               (b) Without  limiting the  obligation  of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the inventory so returned in such case
has a value in excess of $10,000 other than returns from retail customers in the
ordinary  course of the business of Borrower in accordance with the then current
return policy of the Borrower (provided that such return policy shall be no more
favorable  to the retail  customer in any  material  respect  than the policy in
effect as of the date hereof). At any time that Inventory is returned, reclaimed
or  repossessed,  the Account (or portion  thereof) which arose from the sale of
such  returned,  reclaimed  or  repossessed  Inventory  shall  not be  deemed an
Eligible  Account.  In the event any account  debtor  returns  Inventory when an
Event of Default exists or has occurred and is continuing,  Borrower shall, upon
Lender's  request,  (i) hold the returned  Inventory  in trust for Lender,  (ii)
segregate all returned  Inventory from all of its other property,  (iii) dispose
of the returned  Inventory solely according to Lender's  instructions,  and (iv)
not issue any credits,  discounts or  allowances  with respect  thereto  without
Lender's prior written consent.

               (c) With respect to each Receivable: (i) the amounts shown on any
invoice  delivered  to Lender or schedule  thereof  delivered to Lender shall be
true and  complete,  (ii) no  payments  shall be made  thereon  except  payments
immediately  delivered to Lender pursuant to the terms of this Agreement,  (iii)
no  credit,  discount,  allowance  or  extension  or  agreement  for  any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts,  allowances or
extensions  made or given in the  ordinary  course  of  Borrower's  business  in
accordance with the then current  practices and policies of Borrower (so long as
such practices and policies are no more favorable to the account debtor or other
person in any material  respect than those in effect on the date  hereof),  (iv)
there shall be no  setoffs,  deductions,  contras,  defenses,  counterclaims  or
disputes  existing or asserted with respect thereto except as reported to Lender
in accordance  with the terms of this  Agreement,  (v) none of the  transactions
giving  rise  thereto  will  violate  any  applicable  State or Federal  laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.

               (d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender,  to verify the  validity,  amount or
any other  matter  relating  to any  Receivable  or other  Collateral,  by mail,
telephone, facsimile transmission or otherwise.

               (e)  Borrower  shall  deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments constituting part of the Collateral which Borrower
now owns or may at any time acquire immediately upon Borrower's receipt thereof,
except as Lender may otherwise agree.

               (f)  Lender  may,  at any time or times  that an Event of Default
exists or has occurred and is continuing,  (i) notify any or all account debtors
that the Receivables have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts



                                       24

<PAGE>



debtors to make payment of Receivables  directly to Lender, (ii) extend the time
of  payment  of,  compromise,  settle or  adjust  for  cash,  credit,  return of
merchandise  or  otherwise,  and  upon  any  terms  or  conditions,  any and all
Receivables  or  other  obligations  included  in  the  Collateral  and  thereby
discharge or release the account debtor or any other party or parties in any way
liable for payment  thereof  without  affecting  any of the  Obligations,  (iii)
demand, collect or enforce payment of any Receivables or such other obligations,
but without any duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment  thereof nor for the  negligence of its agents or
attorneys  with respect  thereto and (iv) take whatever  other action Lender may
deem  necessary or desirable for the  protection of its  interests.  At any time
that an Event of Default exists or has occurred and is  continuing,  at Lender's
request, all invoices and statements sent to any account debtor shall state that
the Receivables and such other  obligations have been assigned to Lender and are
payable  directly and only to Lender and Borrower  shall  deliver to Lender such
originals  of  documents  evidencing  the  sale  and  delivery  of  goods or the
performance of services giving rise to any Receivables as Lender may require.

         7.3 Inventory  Covenants.  With respect to the Inventory:  (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate  records  itemizing and describing the kind,  type,
quality  and  quantity  of  Inventory,   Borrower's   cost  therefor  and  daily
withdrawals  therefrom  and  additions  thereto;  (b) Borrower  shall  conduct a
physical  count of the  Inventory  at least once each  year,  but at any time or
times as  Lender  may  request  on or after an Event of  Default,  and  promptly
following such physical  inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such  physical  count;  (c)  Borrower  shall not remove any  Inventory  from the
locations set forth or permitted  herein,  without the prior written  consent of
Lender, except (i) for sales of Inventory in the ordinary course of the business
of Borrower,  (ii) for Inventory  purchased by Borrower from a third party which
is in transit to a location set forth or permitted  herein and is  identified to
Lender as Inventory in transit, (iii) to move Inventory from time to time in the
ordinary course of business to third party processors or outside  contractors in
order for such third party or outside  contractor  to process or otherwise  work
with such Inventory; provided, that, all such Inventory is reported to Lender as
Inventory at such third party  locations,  and (iv) to move  Inventory  directly
from one location set forth or permitted  herein to another such  location;  (d)
upon Lender's request,  Borrower shall, at its expense, no more than once in any
twelve (12) month  period,  but at any time or times as Lender may request on or
after an Event of Default exists or has occurred and is  continuing,  deliver or
cause  to be  delivered  to  Lender  written  reports  or  appraisals  as to the
Inventory  in  form,  scope  and  methodology  acceptable  to  Lender  and by an
appraiser  acceptable  to Lender,  addressed  to Lender or upon which  Lender is
expressly permitted to rely; (e) in the event that the amount of Inventory shown
on the books and  records of Borrower  is greater  than the amount of  Inventory
based on the  physical  count of Inventory by more than five (5%) percent at any
time (but at any time or times as  Lender  may  request  on or after an Event of
Default  exists or has  occurred  and is  continuing),  upon  Lender's  request,
Borrower shall, at its expense, conduct through RGIS Inventory Specialists, Inc.
or another inventory  counting service acceptable to Lender, a physical count of
the Inventory in form, scope and methodology  acceptable to Lender,  the results
of



                                       25

<PAGE>



which shall be reported  directly by such inventory  counting  service to Lender
and Borrower shall  promptly  deliver  confirmation  in a form  satisfactory  to
Lender that appropriate  adjustments have been made to the inventory  records of
Borrower to reconcile the inventory count to Borrower's  inventory records;  (f)
Borrower  shall  produce,  use,  store  and  maintain  the  Inventory  with  all
reasonable care and caution and in accordance  with applicable  standards of any
insurance and in conformity with applicable laws (including the  requirements of
the  Federal  Fair  Labor  Standards  Act of 1938,  as  amended  and all  rules,
regulations  and orders related  thereto);  (g) as between  Borrower and Lender,
Borrower assumes all  responsibility  and liability  arising from or relating to
the production,  use, sale or other  disposition of the Inventory;  (h) Borrower
shall not sell  Inventory to any customer on approval,  or any other basis which
entitles  the  customer to return or may obligate  Borrower to  repurchase  such
Inventory  except  for the right of  return  given to  retail  customers  in the
ordinary  course of the business of Borrower in accordance with the then current
return policy of Borrower (so long as such policy shall be no more  favorable to
the retail  customer in any  material  respect  than the policy in effect on the
date  hereof);  (i) Borrower  shall keep the  Inventory  in good and  marketable
condition;  and (j) Borrower shall not,  without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval.  The foregoing shall
not be construed to limit the existing  customary practice of Borrower to accept
returns from time to time from customers in the ordinary  course of the business
of Borrower.

         7.4 Equipment  Covenants.  With respect to the Equipment:  (a) Borrower
shall keep the Equipment necessary to operate the businesses of Borrower in good
order,  repair,  running  and  marketable  condition  (ordinary  wear  and  tear
excepted);  (b) Borrower shall use the Equipment  with all  reasonable  care and
caution and in  accordance  with  applicable  standards of any  insurance and in
conformity  with all applicable  laws;  and (c) as between  Borrower and Lender,
Borrower assumes all  responsibility  and liability  arising from the use of the
Equipment.

         7.5 Power of  Attorney.  Borrower  hereby  irrevocably  designates  and
appoints  Lender (and all persons  designated by Lender) as Borrower's  true and
lawful attorney-in-fact,  and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would  constitute an Event of Default exists or has occurred and is
continuing  (i) demand  payment on Receivables or other proceeds of Inventory or
other  Collateral,  (ii) enforce payment of Receivables by legal  proceedings or
otherwise,  (iii) exercise all of Borrower's  rights and remedies to collect any
Receivable or other  Collateral,  (iv) sell or assign any  Receivable  upon such
terms,  for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust, compromise, extend or renew a Receivable, (vi) discharge and
release any  Receivable,  (vii) prepare,  file and sign  Borrower's  name on any
proof of claim in  bankruptcy  or other  similar  document  against  an  account
debtor,  (viii)  notify the post  office  authorities  to change the address for
delivery of Borrower's  mail to an address  designated  by Lender,  and open and
dispose of all mail addressed to Borrower,  provided, that, Lender shall use all
reasonable  efforts to only open and dispose of mail which it receives  pursuant
to the  exercise  by Lender of its  rights  set forth in this  Section  7.5 from
account debtors or other persons  indebted to Borrower or any Obligor,  or which
might relate to the Collateral or proceeds thereof,  or from suppliers,  vendors
or other trade creditors of Borrower or any Obligor,



                                       26

<PAGE>



and (ix) do all acts and things which are necessary,  in Lender's determination,
to fulfill  Borrower's  obligations under this Agreement and the other Financing
Agreements  and (b) at any time to (i) take control in any manner of any item of
payment or proceeds of any Collateral or other item or proceeds  received in the
Blocked  Accounts  or  otherwise  remitted  to Lender,  (ii) have  access to any
lockbox or postal box into which  Borrower's  mail is  deposited,  (iii) endorse
Borrower's name upon any items of payment or proceeds of any Collateral or other
item or  proceeds  received in the Blocked  Accounts  or  otherwise  remitted to
Lender  and  deposit  the  same  in  Lender's  account  for  application  to the
Obligations,  (iv) endorse  Borrower's  name upon any chattel  paper,  document,
instrument, invoice, or similar document or agreement relating to any Receivable
or any goods  pertaining  thereto or any other  Collateral,  (v) sign Borrower's
name on any  verification  of Receivables and notices thereof to account debtors
and (vi) execute in  Borrower's  name and file any UCC  financing  statements or
amendments  thereto,  in each case to the extent  not  otherwise  prohibited  by
applicable law and in accordance  with the other terms of this Agreement and the
other Financing  Agreements,.  Borrower hereby releases Lender and its officers,
employees and designees from any liabilities  arising from any act or acts under
this power of  attorney  and in  furtherance  thereof,  whether of  omission  or
commission,  except  as a result of  Lender's  own  gross  negligence  or wilful
misconduct as determined pursuant to a final  non-appealable order of a court of
competent jurisdiction.

         7.6  Right to Cure.  Lender  may,  at its  option,  (a) upon  notice to
Borrower, cure any default by Borrower under any material agreement with a third
party  which  affects  the  Collateral,  its value or the  ability  of Lender to
collect,  sell or otherwise dispose of the Collateral or the rights and remedies
of Lender  therein or the ability of Borrower to perform its  obligations  under
the other Financing  Agreements;  (b) discharge taxes, liens, security interests
or other  encumbrances  at any time  levied on or existing  with  respect to the
Collateral  and (c) pay any amount,  incur any expense or perform any act which,
in Lender's  good faith  judgment,  is  necessary  or  appropriate  to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto.  Lender may add any amounts so expended to the  Obligations  and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure,  payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower.  Any payment  made or other  action taken by Lender under this Section
shall be without  prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.

         7.7 Access to Premises. From time to time as requested in good faith by
Lender,  at the cost and expense of Borrower,  (a) Lender or its designee  shall
have complete access to all of Borrower's  premises during normal business hours
and after notice to Borrower,  or at any time and without  notice to Borrower if
an Event of Default exists or has occurred and is  continuing,  for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records,  including the Records,  and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) use during normal business hours such of Borrower's  personnel,
equipment, supplies and premises as may



                                       27

<PAGE>



be reasonably  necessary for the foregoing and if an Event of Default  exists or
has occurred and is continuing for the collection of Receivables and realization
of other Collateral.


SECTION 8.     REPRESENTATIONS AND WARRANTIES

         Borrower hereby  represents and warrants to Lender the following (which
shall  survive the  execution  and  delivery of this  Agreement),  the truth and
accuracy  of which  are a  continuing  condition  of the  making  of  Loans  and
providing Letter of Credit Accommodations by Lender to Borrower:

         8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation  and is  duly  qualified  as a  foreign  corporation  and in  good
standing in all states or other jurisdictions where the nature and extent of the
business  transacted by it or the  ownership of assets makes such  qualification
necessary,  except for those  jurisdictions  in which the  failure to so qualify
would not have a material  adverse  effect on  Borrower's  financial  condition,
results of  operation  or  business  or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions  contemplated hereunder and thereunder
are all within Borrower's  corporate  powers,  have been duly authorized and are
not in contravention of applicable law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
or any material  agreement  or  undertaking  to which  Borrower is a party or by
which Borrower or its property are bound. This Agreement and the other Financing
Agreements   constitute  legal,  valid  and  binding   obligations  of  Borrower
enforceable in accordance with their  respective  terms.  Borrower does not have
any Subsidiaries except as set forth on the Information Certificate.

         8.2 Financial  Statements;  No Material  Adverse Change.  All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the  periods  set forth  therein.  Except as  disclosed  in any  interim
financial  statements  furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent  audited  financial  statements  furnished by Borrower to Lender
prior to the date of this Agreement.

         8.3 Chief Executive Office;  Collateral Locations.  The chief executive
office of Borrower and Borrower's  Records  concerning  Receivables  are located
only at the  address  set forth  below  and at 109 S.  122nd E.  Avenue,  Tulsa,
Oklahoma  74128  and its only  other  places  of  business  and the  only  other
locations of Collateral,  if any, are the addresses set forth in the Information
Certificate,  subject to the right of Borrower to  establish  new  locations  in
accordance  with  Section  9.2  below.  The  Information  Certificate  correctly
identifies any of such locations



                                       28

<PAGE>



which are not owned by  Borrower  and sets  forth the  owners  and/or  operators
thereof and to the best of Borrower's knowledge, the holders of any mortgages on
such locations.

         8.4 Priority of Liens; Title to Properties.  The security interests and
liens granted to Lender under this Agreement and the other Financing  Agreements
constitute  valid and perfected  first priority liens and security  interests in
and upon the  Collateral  subject  only to the liens  indicated  on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and  marketable  title to all of its  properties and assets subject to no liens,
mortgages,  pledges,  security  interests,  encumbrances or charges of any kind,
except  those  granted to Lender and such others as are  specifically  listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.

         8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns,  reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and  accurate in all material  respects.  Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment  received
by it,  except taxes the validity of which are being  contested in good faith by
appropriate  proceedings  diligently  pursued and available to Borrower and with
respect to which  adequate  reserves have been set aside on its books.  Adequate
provision  has been made for the  payment of all  accrued  and  unpaid  Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.

         8.6  Litigation.  Except as set forth on the  Information  Certificate,
there is no present  investigation by any governmental agency pending, or to the
best of Borrower's  knowledge  threatened,  against or affecting  Borrower,  its
assets or  business  and there is no action,  suit,  proceeding  or claim by any
Person  pending,  or to the best of  Borrower's  knowledge  threatened,  against
Borrower or its assets or  goodwill,  or against or affecting  any  transactions
contemplated by this Agreement,  which if adversely  determined against Borrower
would  result in any  material  adverse  change in the  assets  or  business  of
Borrower or would  impair the  ability of  Borrower  to perform its  obligations
hereunder or under any of the other Financing  Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.

         8.7   Compliance with Other Agreements and Applicable Laws.

               (a) Borrower is not in default in any material  respect under, or
in  violation  in any  respect of any of the terms of, any  material  agreement,
contract,  instrument,  lease or other  commitment  to which it is a party or by
which it or any of its  assets  are  bound.  Borrower  is in  compliance  in all
material   respects  with  the  requirements  of  all  applicable  laws,  rules,
regulations and orders of any governmental  authority  relating to its business,
including, without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938,  as  amended,  ERISA,  the  Code,  as  amended,  and the  rules and
regulations  thereunder,  all Federal,  State and local  statutes,  regulations,
rules and orders relating to consumer credit (including,  without limitation, as
each has been amended, the



                                       29

<PAGE>



Truth-in-Lending  Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Fair  Credit  Reporting  Act,  and  regulations,  rules  and  orders
promulgated thereunder), all Federal, State and local states, regulations, rules
and orders pertaining to sales of consumer goods (including, without limitation,
the Consumer  Products  Safety Act of 1972,  as amended,  and the Federal  Trade
Commission  Act of 1914,  as  amended,  and all  regulations,  rules and  orders
promulgated thereunder and all Environmental Laws).

               (b) Borrower has obtained,  or has taken all action  necessary to
obtain,  all material  permits,  licenses,  approvals,  consents,  certificates,
orders or  authorizations  of any  governmental  agency  required for the lawful
conduct of its  business.  Schedule 8.7 hereto sets forth all material  permits,
licenses,  approvals,  consents,  certificates,  orders or  authorizations  (the
"Permits")  issued to or held by Borrower as of the date hereof by any  Federal,
State or local governmental agency and any applications pending by Borrower with
such Federal,  State or local  governmental  agency.  The Permits constitute all
permits, licenses, approvals, consents,  certificates,  orders or authorizations
necessary for Borrower to own and operate its business as presently conducted or
proposed to be  conducted  where the failure to have such  Permits  would have a
material adverse effect on the business,  performance,  operations or properties
of Borrower or the legality, validity or enforceability of this Agreement or the
other Financing Agreements or the ability of Borrower to perform its obligations
under the Agreement or any of the other  Financing  Agreements or the rights and
remedies  of  Lender  under  this  Agreement  or  any  of  the  other  Financing
Agreements.  All of the Permits are valid and  subsisting  and in full force and
effect.  There are no actions,  claims or proceedings  pending or to the best of
Borrower's  knowledge,  threatened  that  seek  the  revocation,   cancellation,
suspension or  modification  of any of the Permits  except for any such actions,
claims or proceedings disclosed in the Information  Certificate or arising after
the date  hereof,  in each  case,  which are being  contested  in good  faith by
appropriate proceedings diligently pursued and available to Borrower, so long as
such  Permit  remains in effect  during the  pendency of such  action,  claim or
proceeding.

         8.8   Employee Benefits.

               (a) Borrower  has not engaged in any  transaction  in  connection
with which Borrower or any ERISA  Affiliate  could  reasonably be expected to be
subject to either a civil  penalty  assessed  pursuant to ERISA or a tax imposed
pursuant to the Code with respect to a Plan in excess of $100,000.

               (b) No liability to the Pension Benefit Guaranty  Corporation has
been or is expected by Borrower to be incurred  with respect to any Plan.  There
has been no reportable event (within the meaning of ERISA) or any other event or
condition with respect to any Plan which presents a material risk of termination
of any such plan by the Pension Benefit Guaranty Corporation.

               (c) Full payment has been made of all amounts  which  Borrower or
any ERISA  Affiliate is required under ERISA and the Code to have paid under the
terms of each Plan as  contributions to such Plan as of the last day of the most
recent fiscal year of such plan ended



                                       30

<PAGE>



prior to the date hereof,  and no accumulated  funding deficiency (as defined in
ERISA and the Code), whether or not waived, exists with respect to any Plan.

               (d) The current value of all vested  accrued  benefits  under the
Plans does not exceed the current value of the assets of such plans allocable to
such  vested  accrued  benefits  by more  than  $350,000  as to any one Plan and
$650,000  in the  aggregate  as to all  Plans.  The terms  "current  value"  and
"accrued benefit" have the meanings specified in ERISA.

               (e) Neither Borrower nor any ERISA Affiliate has any liability or
potential  liability with respect to any  "multiemployer  plan" (as such term is
defined in ERISA) that is subject to Title IV of ERISA (other than any liability
arising  in the  ordinary  course  of the  business  of  Borrower  or any  ERISA
Affiliate  for  contributions  to such plan in  accordance  with the  collective
bargaining agreement of Borrower), except as set forth in Schedule 8.8 hereto.

         8.9   Environmental Compliance.

               (a) Except as set forth on Schedule 8.9 hereto,  (i) Borrower has
not  generated,  used,  stored,  treated,  transported,  manufactured,  handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which  violates any  applicable  Environmental
Law or any  license,  permit,  certificate,  approval  or similar  authorization
thereunder and (ii) the operations of Borrower complies in all material respects
with all Environmental Laws and all licenses, permits,  certificates,  approvals
and similar authorizations thereunder.

               (b) Except as set forth on Schedule 8.9 hereto, there has been no
investigation,  proceeding,  complaint,  order,  directive,  claim,  citation or
notice by any governmental authority or any other third party nor is any pending
or to the best of Borrower's knowledge threatened,  with respect to any material
non-compliance   with  or  material   violation  of  the   requirements  of  any
Environmental Law by Borrower or the release, spill or discharge,  threatened or
actual, of any Hazardous  Material or the generation,  use, storage,  treatment,
transportation,  manufacture,  handling, production or disposal of any Hazardous
Materials.

               (c) Borrower has no material liability  (contingent or otherwise)
in connection with a release,  spill or discharge,  threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment,  transportation,
manufacture, handling, production or disposal of any Hazardous Materials.

               (d) Borrower has all licenses, permits,  certificates,  approvals
or similar  authorizations  required to be obtained or filed in connection  with
the operations of Borrower under any Environmental Law.

         8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other  accounts  in the name of or used by  Borrower  maintained  at any bank or
other financial institution are set



                                       31

<PAGE>



forth on Schedule 6.3 hereto,  subject to the right of Borrower to establish new
accounts in accordance with Section 9.13 below.

         8.11  Acquisition of Purchased Assets.

               (a) The Purchase  Agreements  and the  transactions  contemplated
thereunder  have been duly executed,  delivered and performed in accordance with
their  terms  by the  respective  parties  thereto  in all  respects,  including
fulfillment  (not merely the waiver,  except as may be  disclosed  to Lender and
consented to in writing by Lender) of all conditions precedent set forth therein
and giving effect to the terms of the Purchase Agreements and the assignments to
be executed and delivered by Seller (or any of its  Affiliates or  Subsidiaries)
thereunder, Borrower acquired and has good and marketable title to the Purchased
Assets,  free and clear of all claims,  liens,  pledges and  encumbrances of any
kind, except as permitted hereunder.

               (b)  All  actions  and  proceedings   required  by  the  Purchase
Agreements,  applicable  law or  regulation  (including,  but  not  limited  to,
compliance with the  Hart-Scott-Rodino  AntiTrust  Improvements  Act of 1976, as
amended, but not including for this purpose applicable bulk sales statutes) have
been taken and the transactions  required  thereunder have been duly and validly
taken and consummated  (except for those  transactions  required by the Purchase
Agreements to be taken after the closing of the acquisition).

               (c) No court of competent jurisdiction has issued any injunction,
restraining   order  or  other  order  which   prohibits   consummation  of  the
transactions  described in the Purchase  Agreements and no governmental or other
action or proceeding has been  threatened or commenced,  seeking any injunction,
restraining  order or other order which  seeks to void or  otherwise  modify the
transactions described in the Purchase Agreements.

               (d) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Purchase Agreements.

         8.12  Capitalization.

               (a) All of the issued and outstanding  shares of capital stock of
Borrower  are  directly  and  beneficially  owned  and held by Leer  Acquisition
Company,  Inc.  and all of such shares have been duly  authorized  and are fully
paid and  non-assessable,  free and  clear of all  claims,  liens,  pledges  and
encumbrances of any kind, except as disclosed in writing to Lender.

               (b) Borrower is solvent and will continue to be solvent after the
creation of the  Obligations,  the  security  interests  of Lender and the other
transaction  contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not  unreasonably  small capital) to carry on its business and all businesses in
which it is about to engage.  The assets and  properties  of  Borrower at a fair
valuation and at their present fair salable value are, and will be, greater than
the indebtedness of Borrower, and



                                       32

<PAGE>



including  subordinated and contingent liabilities computed at the amount which,
to the best of Borrower's  knowledge,  represents an amount which can reasonably
be expected to become an actual or matured liability.

         8.13  Accuracy  and   Completeness  of  Information.   All  information
furnished  by or on behalf of Borrower in writing to Lender in  connection  with
this  Agreement  or any of the other  Financing  Agreements  or any  transaction
contemplated  hereby or thereby,  including all  information on the  Information
Certificate is true and correct in all material respects on the date as of which
such  information  is dated or  certified  and does not omit any  material  fact
necessary  in  order  to make  such  information  not  misleading.  No  event or
circumstance  has occurred which could reasonably be expected to have a material
adverse  affect on the business or assets of Borrower,  which has not been fully
and accurately disclosed to Lender in writing.

         8.14  Survival  of  Warranties;  Cumulative.  All  representations  and
warranties  contained in this Agreement or any of the other Financing Agreements
shall survive the  execution and delivery of this  Agreement and shall be deemed
to have been made again to Lender on the date of each  additional  borrowing  or
other credit accommodation  hereunder and shall be conclusively presumed to have
been relied on by Lender  regardless of any  investigation  made or  information
possessed by Lender. The  representations  and warranties set forth herein shall
be cumulative and in addition to any other  representations  or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.


SECTION 9.     AFFIRMATIVE AND NEGATIVE COVENANTS

         9.1  Maintenance of Existence.  Borrower  shall at all times  preserve,
renew and keep in full, force and effect its corporate  existence and rights and
franchises  with  respect  thereto  and  maintain  in full  force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts  necessary  to carry on the  business as  presently  or proposed to be
conducted.  Borrower  shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name,  which notice shall set forth the new
name  and  Borrower  shall  deliver  to  Lender a copy of the  amendment  to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the  jurisdiction of  incorporation  of Borrower as
soon as it is available.

         9.2 New Collateral Locations. Borrower may open any new location within
the  continental  United States  provided  Borrower (a) gives Lender thirty (30)
days prior written  notice of the intended  opening of any such new location and
(b) executes and  delivers,  or causes to be executed and  delivered,  to Lender
such  agreements,  documents,  and  instruments  as Lender  may deem  reasonably
necessary  or  desirable  to protect its  interests  in the  Collateral  at such
location, including UCC financing statements.

         9.3   Compliance with Laws, Regulations, Etc.



                                       33

<PAGE>



               (a) Borrower  shall at all times comply in all material  respects
with all applicable provisions of laws, rules, regulations,  licenses,  permits,
approvals and orders and duly observe all material requirements, of any foreign,
Federal, State or local governmental authority,  including,  without limitation,
the Occupational  Safety and Health Act of 1970, as amended,  the Code, the Fair
Labor  Standards  Act of  1938,  as  amended,  and  the  rules  and  regulations
thereunder, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit  (including,  without  limitation,  as each has been
amended, the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act and the Fair Credit  Reporting Act, and  regulations,  rules and
orders  promulgated   thereunder),   all  Federal,  State  and  local  statutes,
regulations,  rules and orders pertaining to sales of consumer goods (including,
without  limitation,  the Consumer Products Safety Act of 1972, as amended,  and
the Federal Trade Commission Act of 1914, as amended, and all regulations, rules
and orders promulgated thereunder) and all statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including, without limitation, all Environmental Laws.

               (b)  Borrower  shall  establish  and  maintain,  at its  expense,
reasonable  procedures to assure and monitor its continued  compliance  with all
Environmental  Laws  in all  of  its  operations.  Copies  of all  environmental
surveys,  audits,  assessments,  feasibility  studies  and  results of  remedial
investigations disclosing material environmental conditions obtained by Borrower
shall be promptly furnished, or caused to be furnished, by Borrower to Lender.

               (c)  Borrower  shall give both oral and written  notice to Lender
promptly  upon the  receipt  by  Borrower,  of any  written  notice  of,  or its
otherwise  obtaining  reliable  knowledge  of, (i) the  occurrence  of any event
involving  the  release,  spill  or  discharge,  threatened  or  actual,  of any
Hazardous Material which results in any material non-compliance with or material
violation of applicable  Environmental Laws or which has a reasonable likelihood
of  resulting in any  material  liability to any third party,  or (ii) any third
party investigation,  proceeding,  complaint, order, directive, claims, citation
or notice of violation  involving  actual or potential  material  liability with
respect to: (A) any material  non-compliance  with or material  violation of any
Environmental Law by Borrower or (B) the release, spill or discharge, threatened
or actual,  of any  Hazardous  Material  or (C) the  generation,  use,  storage,
treatment, transportation,  manufacture, handling, production or disposal of any
Hazardous  Materials or (D) any other  environmental,  health or safety  matter,
which affects  Borrower or its business,  operations or assets or any properties
at which it transported, stored or disposed of any Hazardous Materials.

               (d) Without  limiting the generality of the  foregoing,  whenever
Lender  reasonably  determines that there is any occurrence,  event or condition
which has a reasonable  likelihood  of resulting in any material  non-compliance
with any Environmental Law, or any occurrence, event or condition which requires
any  action  by or on  behalf  of  Borrower,  in order to avoid  the  reasonable
likelihood of any material  non-compliance  with any Environmental Law, Borrower
shall,  at  Lender's  request and the  expense of  Borrower:  (i) to prepare and
deliver to Lender a report as to such  occurrence,  event or  condition  setting
forth  the  results  of its  review,  a  proposed  plan for  responding  to such
occurrence, event or condition and an estimate of the costs thereof



                                       34

<PAGE>



and (ii)  provide to Lender a  supplemental  report  whenever  the scope of such
occurrence,  event or  condition,  or the  response of  Borrower  thereto or the
estimated costs thereof shall change in any material respect.  At any time after
the receipt by Lender of such  report or reports (so long as it is prepared  and
delivered to Lender in a timely  manner,  otherwise at any time),  upon Lender's
reasonable  request,  at the  expense  of  Borrower,  Borrower  shall  cause  an
independent  environmental engineer to prepare and deliver a report, in form and
scope acceptable to Lender, as to such occurrence,  event or condition reviewing
the  proposed  plan for  responding  thereto and the  estimated  costs  thereof.
Borrower  shall  have the  right to  review,  comment  on and  approve  all such
reports,  which review, comment and approval shall not be unreasonably withheld,
conditioned or delayed,  provided, that, such review, comment and approval shall
not in any manner delay the receipt by Lender of such reports.

               (e)  Borrower  shall  indemnify  and hold  harmless  Lender,  its
directors, officers, employees, agents, representatives,  successors and assigns
from and against any and all losses, claims,  damages,  liabilities,  costs, and
expenses  (including  attorneys' fees and legal expenses) directly or indirectly
arising  out  of  or   attributable   to  the  use,   generation,   manufacture,
reproduction,  storage, release, threatened release, spill, discharge,  disposal
or presence of a Hazardous Material in connection with the business, operations,
assets or properties of Borrower,  including,  without limitation,  the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and  implementation of any closure,
remedial or other required plans. All representations, warranties, covenants and
indemnifications   in  this  Section  9.3  shall  survive  the  payment  of  the
Obligations and the termination or non-renewal of this Agreement.

         9.4 Payment of Taxes and Claims.  Borrower shall duly pay and discharge
all taxes,  assessments,  contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested  in good  faith by  appropriate  proceedings  diligently  pursued  and
available to Borrower and with respect to which adequate  reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed on
Lender  as a result  of the  financing  arrangements  provided  for  herein  and
Borrower  agrees to  indemnify  and hold  Lender  harmless  with  respect to the
foregoing,  and to repay to Lender on demand the amount thereof,  and until paid
by Borrower  such amount shall be added and deemed part of the Loans,  provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes  attributable to the income of Lender from any amounts
charged or paid hereunder to Lender.  The foregoing  indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

         9.5 Insurance.  Borrower shall, at all times, maintain with financially
sound and reputable  insurers  insurance with respect to the Collateral  against
loss  or  damage  and  all  other  insurance  of the  kinds  and in the  amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated.  Said policies
of insurance  shall be  satisfactory  to Lender as to form,  amount and insurer.
Borrower  shall  furnish  certificates,  policies or  endorsements  to Lender as
Lender shall require as proof of



                                       35

<PAGE>



such insurance,  and, if Borrower fails to do so, Lender is authorized,  but not
required, to obtain such insurance at the expense of Borrower. All policies with
respect to the  Collateral  shall  provide  for at least  thirty (30) days prior
written notice to Lender of any  cancellation  or reduction of coverage and that
Lender may act as attorney for Borrower in  obtaining,  and at any time an Event
of  Default  exists or has  occurred  and is  continuing,  adjusting,  settling,
amending and canceling such  insurance.  Borrower shall cause Lender to be named
as a loss payee and an  additional  insured (but without any  liability  for any
premiums)  under such  insurance  policies  with respect to the  Collateral  and
Borrower shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance  satisfactory to Lender.  Such lender's
loss payable  endorsements  shall  specify  that the proceeds of such  insurance
shall be payable to Lender as its interests may appear and further  specify that
Lender shall be paid regardless of any act or omission by Borrower or any of its
affiliates.  At its option,  Lender may apply any insurance proceeds received by
Lender at any time to the cost of repairs or replacement of Collateral and/or to
payment of the  Obligations,  whether or not then due,  in any order and in such
manner as Lender may determine or hold such proceeds as cash  collateral for the
Obligations.

         9.6   Financial Statements and Other Information.

               (a)  Borrower  shall keep proper  books and records in which true
and  complete  entries  shall be made of all dealings or  transactions  of or in
relation to the Collateral and the business of Borrower and its Subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within thirty (30) days after the end of each fiscal month (other
than  December  of any year) and  within  forty-five  (45) days after the end of
December of each year, monthly unaudited consolidated financial statements, and,
if Borrower has any Subsidiaries,  unaudited  consolidating financial statements
(including  in each case  balance  sheets,  statements  of  income  and loss and
statements  of cash  flow)  all in  reasonable  detail,  fairly  presenting  the
financial  position  and the  results  of the  operations  of  Borrower  and its
Subsidiaries  as of the end of and  through  such  fiscal  month and (ii) within
ninety  (90)  days  after  the end of each  fiscal  year,  audited  consolidated
financial statements and, unaudited  consolidating financial statements of JBPCO
and its Subsidiaries, so long as Borrower shall be one of such Subsidiaries, and
if not, then audited  financial  statements of Borrower  (including in each case
balance  sheets,  statements  of income  and loss,  statements  of cash flow and
statements of shareholders'  equity), and the accompanying notes thereto, all in
reasonable  detail,  fairly presenting the financial position and the results of
the  operations  of  JBPCO  and its  Subsidiaries  as of the end of and for such
fiscal year,  together with the  unqualified  opinion of  independent  certified
public  accountants,  which accountants shall be an independent  accounting firm
selected by Borrower and reasonably acceptable to Lender, that such consolidated
financial  statements  have been prepared in accordance  with GAAP,  and present
fairly the results of  operations  and  financial  condition of Borrower and its
Subsidiaries as of the end of and for the fiscal year then ended.




                                       36

<PAGE>



               (b)  Borrower  shall  promptly  notify  Lender in  writing of the
details of (i) any loss,  damage,  investigation,  action,  suit,  proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations  or which would result in any material  adverse change in Borrower's
business,  properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which,  with the passage of
time or giving of notice or both, would constitute an Event of Default.

               (c) Borrower  shall  promptly after the sending or filing thereof
furnish or cause to be furnished to Lender  copies of all public  reports  which
Borrower  sends to its  stockholders  generally  and copies of all  reports  and
registration  statements  which  Borrower files with the Securities and Exchange
Commission,  any national  securities  exchange or the National  Association  of
Securities Dealers, Inc.

               (d)  Borrower  shall  furnish or cause to be  furnished to Lender
such  budgets,  forecasts,  projections  and other  information  respecting  the
Collateral  and the  business of  Borrower,  as Lender  may,  from time to time,
reasonably  request.  Lender  is  hereby  authorized  to  deliver  a copy of any
financial  statement  or any  other  information  relating  to the  business  of
Borrower  to any  court or other  government  agency  or to any  participant  or
assignee or prospective  participant or assignee.  Borrower  hereby  irrevocably
authorizes  and directs  all  accountants  or auditors to deliver to Lender,  at
Borrower's  expense,  copies of the  financial  statements  of Borrower  and any
reports or management letters prepared by such accountants or auditors on behalf
of  Borrower  and to  disclose  to  Lender  such  information  as they  may have
regarding the business of Borrower. Any documents,  schedules, invoices or other
papers  delivered to Lender may be destroyed or otherwise  disposed of by Lender
one (1) year  after  the same are  delivered  to  Lender,  except  as  otherwise
designated by Borrower to Lender in writing.

         9.7 Sale of Assets,  Consolidation,  Merger, Dissolution, Etc. Borrower
shall not,  directly or indirectly,  (a) merge into or with or consolidate  with
any other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease,  transfer,  abandon or otherwise dispose of
any stock or  indebtedness to any other Person or any of its assets to any other
Person  (except for (i) sales of Inventory  in the ordinary  course of business,
(ii) the  disposition  of worn-out or obsolete  Equipment or Equipment no longer
used in the business of Borrower so long as such sales do not involve  Equipment
having  an  aggregate  fair  market  value in  excess  of  $50,000  for all such
Equipment disposed of in any fiscal year of Borrower, (iii) after written notice
to Lender,  the  disposition  through  the  abandonment,  cancellation  or other
failure to maintain any trademark or other intellectual property (A) which is no
longer  used or  useful in the  business  of  Borrower  has not been used in the
business  of  Borrower  for a period  of not less  than six (6)  months,  is not
otherwise  material to the business of Borrower in any respect and has little or
no value or (B) which  pursuant to applicable law may not be renewed or extended
and (iv) sales or other  dispositions  by Borrower of assets in connection  with
the closing or sale of a retail  store  location of  Borrower  which  consist of
leasehold interests in the premises of such store, the Equipment located at such
premises  and the books and records  relating  exclusively  and  directly to the
operations of such store; provided, that, (A) the aggregate amount of all of the



                                       37

<PAGE>



assets so sold by Borrower in all such  transactions  shall not exceed  $50,000,
(B) as of the date of such sale or other  disposition  and after  giving  effect
thereto,  no Event of Default,  or act,  condition or event which with notice or
passage  of time  would  constitute  an Event of  Default,  shall  exist or have
occurred, and (C) such sale shall be on commercially reasonable prices and terms
in a bona fide arm's length  transaction,  (c) form or acquire any Subsidiaries,
or (d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.

         9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature  whatsoever  on any of its  assets or  properties,  including  the
Collateral,  except:  (a) liens and  security  interests  of  Lender;  (b) liens
securing the payment of taxes,  assessments and  governmental  charges or levies
either not yet  overdue or the  validity  of which are being  contested  in good
faith by appropriate  proceedings  diligently  pursued and available to Borrower
and with respect to which  adequate  reserves  have been set aside on its books;
(c)  non-consensual  statutory  liens (other than liens  securing the payment of
taxes,  assessments and governmental  charges or levies) arising in the ordinary
course of Borrower's  business to the extent: (i) such liens secure indebtedness
which is not overdue or (ii) such liens secure  indebtedness  relating to claims
or  liabilities  which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being  contested in good faith by
appropriate  proceedings  diligently pursued and available to Borrower,  in each
case prior to the  commencement of foreclosure or other similar  proceedings and
with respect to which  adequate  reserves have been set aside on its books;  (d)
zoning restrictions,  easements, rights-of-way,  servitudes, licenses, covenants
and other restrictions affecting the use of real property which do not interfere
in any material  respect with the use of such real property or ordinary  conduct
of the business of Borrower as presently  conducted thereon or materially impair
the value of the real property which may be subject thereto;  (e) purchase money
security  interests in Equipment  (including  capital leases) and purchase money
mortgages on real estate arising after the date hereof not to exceed $500,000 in
the aggregate so long as such  security  interests and mortgages do not apply to
any  property of Borrower  other than the  Equipment or real estate so acquired,
and the  indebtedness  secured thereby does not exceed the cost of the Equipment
or real  estate so  acquired,  as the case may be;  (f) the  liens and  security
interests of Seller to secure the  indebtedness of Borrower to Seller  permitted
under Section 9.9(d),  which liens and security  interests are, in all respects,
subject  and  subordinate  in priority to the liens and  security  interests  of
Lender pursuant to the intercreditor and subordination  agreement between Lender
and Seller;  (g) liens on, or rights of setoff against deposits of cash with the
owner or lessor of premises  leased and  operated  by  Borrower in the  ordinary
course of the business of Borrower to secure the  performance by Borrower of its
obligations  under the terms of the lease for such premises;  (h) liens incurred
(other than on Collateral)  or deposits made by Borrower in the ordinary  course
of  the  business  of  Borrower  in  connection   with  worker's   compensation,
unemployment  insurance or other types of social  security  benefits  consistent
with the current  practices of Borrower as of the date hereof,  or to secure the
performance of bids, tenders,  sales, contracts (other than for the repayment of
indebtedness), surety, appeal, customs and performance bonds consistent with the
current practices of Borrower as of the date hereof;  provided, that, such liens
or deposits shall not



                                       38

<PAGE>



interfere in any  material  respect with the use of any property or the ordinary
conduct  of the  business  of  Borrower  or impair  the value of the  assets and
properties of Borrower in any material  respect;  (i) encumbrances  constituting
the  filing  of  notice  financing  statements  of a  lessor's  rights in and to
personal  property  leased to Borrower in the ordinary course of the business of
Borrower;  (j)  non-consensual  statutory  or common  law liens on, or rights of
setoff  against,  cash of Borrower on deposit with any depositary bank listed on
Schedule 6.3 hereto,  or any other banks with whom  Borrower  maintains  deposit
accounts to the extent permitted under Section 6.3 hereof, in favor of the banks
in possession  of such cash (other than the banks at which the Blocked  Accounts
are  maintained as to cash in the Blocked  Accounts);  provided,  that, (i) such
liens  shall  not  secure  any  indebtedness  and (ii)  there  shall  not be any
restrictions  on the  ability or right of  Borrower  to withdraw or use any such
cash; and (k) the security interests and liens set forth on Schedule 8.4 hereto.

         9.9 Indebtedness.  Borrower shall not incur, create,  assume, become or
be liable in any manner with respect to, or permit to exist,  any obligations or
indebtedness, except:

               (a) the Obligations;

               (b) trade  obligations,  operating  leases and normal accruals in
the  ordinary  course of business  not yet due and  payable,  or with respect to
which the Borrower is contesting in good faith the amount or validity thereof by
appropriate  proceedings  diligently pursued and available to Borrower, and with
respect to which adequate reserves have been set aside on its books;

               (c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including  capital leases) in violation
of any other provision of this Agreement;

               (d)  indebtedness  of Borrower to Seller (or to William J. Avery,
Sr., as assignee of Seller after the date hereof)  evidenced by or arising under
the Secured  Subordinated  Promissory  Note,  dated on or about the date hereof,
issued by  Borrower  payable  to  Seller,  which  indebtedness  is  subject  and
subordinate  in right of  payment  to the right of Lender to  receive  the prior
payment in full of all of the  Obligations;  provided,  that,  (i) the principal
amount of such  Indebtedness  shall not exceed $500,000 (or such other amount as
may be determined  pursuant to the terms of the Purchase  Agreements as a result
of the  post-closing  adjustment to the purchase  price in  accordance  with the
terms thereof as in effect on the date hereof), less the aggregate amount of all
payments,  optional or mandatory, of principal in respect thereof, plus interest
thereon at the rate  provided for in such Note, as in effect on the date hereof,
(ii) Borrower shall not, directly,  or indirectly,  make any payments in respect
of such  Indebtedness,  including,  but not limited to, any prepayments or other
non-mandatory  payments,  except  that  Borrower  may make  regularly  scheduled
payments of principal and interest,  on an  unaccelerated  basis,  in respect of
such  indebtedness in accordance with the terms of such Note as in effect on the
date hereof,  provided, that, each of the following conditions is satisfied: (A)
as of the date of each such payment and after giving effect thereto, no Event of
Default, or act, condition or event which



                                       39

<PAGE>



with  notice or passage of time or both would  constitute  an Event of  Default,
shall  exist or have  occurred  and (B) as of the date of each such  payment and
after  giving  effect  thereto,  Excess  Availability  shall  not be  less  than
$100,000,  (iii) Borrower shall not, directly or indirectly,  (A) amend, modify,
alter or change any terms of such  indebtedness  or any  agreement,  document or
instrument  related thereto in any material respect,  or (B) redeem or set aside
or  otherwise  deposit or invest any sums for such  purpose,  and (iv)  Borrower
shall  furnish to Lender all notices,  demands or other  materials in connection
with such  indebtedness  either received by Borrower or on its behalf,  promptly
after receipt  thereof or sent by Borrower or in its behalf,  concurrently  with
the sending thereof, as the case may be;

               (e) unsecured indebtedness of Borrower to Seller arising pursuant
to the Non- Competition  Agreement,  dated on or about the date hereof,  between
Borrower and Seller,  which  indebtedness is subject to and subordinate in right
of payment to the right of Lender to receive the prior payment in full of all of
the Obligations;  provided,  that: (i) the principal amount of such indebtedness
shall not in the aggregate  exceed  $500,000,  less the aggregate  amount of all
payments,  optional or mandatory,  in respect thereof,  (ii) Borrower shall not,
directly  or  indirectly,  make any  payments  in respect of such  indebtedness,
including,  but not limited to, any prepayments or other non-mandatory payments,
except that Borrower may make the regularly scheduled quarterly  installments of
$25,000 each year, on an unaccelerated basis, in respect of such indebtedness in
accordance with the terms of such Non-Competition  Agreement as in effect on the
date hereof,  and (iii) Borrower shall not,  directly or indirectly,  (A) amend,
modify,  alter or  change  any  terms  of such  indebtedness  or any  agreement,
document or instrument related thereto in any material respect, or (B) redeem or
set aside or  otherwise  deposit or invest any sums for such  purpose,  and (iv)
Borrower  shall  furnish to Lender all  notices,  demands or other  materials in
connection with such indebtedness  either received by Borrower or on its behalf,
promptly  after  receipt   thereof  or  sent  by  Borrower  or  in  its  behalf,
concurrently with the sending thereof, as the case may be;

               (f) unsecured  indebtedness of Borrower to Leer arising after the
date hereof  pursuant to loans by Leer to Borrower in cash or other  immediately
available  funds,  provided,  that,  (i) such  indebtedness  is subject  to, and
subordinate  in right of payment  to,  the right of Lender to receive  the prior
payment in full of all of the Obligations on terms and conditions  acceptable to
Lender, (ii) Lender shall have received,  in form and substance  satisfactory to
Lender, a subordination  agreement  providing for the terms of the subordination
in right of payment  of such  indebtedness  of  Borrower  to the  payment of the
Obligations, duly authorized, executed and delivered by Leer and Borrower, (iii)
Borrower  shall not,  directly  or  indirectly,  make or be required to make any
payments in respect of such  indebtedness,  except to the extent permitted under
Section  9.11(c)  below,  (iv) Borrower shall not,  directly or indirectly,  (A)
amend,  modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, or (B) redeem, retire, defease, purchase
or otherwise  acquire such  indebtedness,  or set aside or otherwise  deposit or
invest any sums for such purpose,  and (v) Borrower  shall furnish to Lender all
notices, demands or other materials concerning such indebtedness either received
by



                                       40

<PAGE>



Borrower or on its behalf,  promptly after receipt thereof,  or sent by Borrower
or on its behalf, concurrently with the sending thereof, as the case may be;

               (g) the indebtedness set forth on Schedule 9.9 hereto;  provided,
that, (i) Borrower may only make regularly  scheduled  payments of principal and
interest in respect of such  indebtedness  in  accordance  with the terms of the
agreement or  instrument  evidencing or giving rise to such  indebtedness  as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly,  (A)
amend,  modify, alter or change the terms of such indebtedness or any agreement,
document or instrument  related thereto as in effect on the date hereof,  or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or  otherwise  deposit  or  invest  any sums for such  purpose,  and (iii)
Borrower shall furnish to Lender all notices or demands in connection  with such
indebtedness  either  received by Borrower or on its behalf,  promptly after the
receipt  thereof,  or sent by Borrower or on its behalf,  concurrently  with the
sending thereof, as the case may be.

         9.10 Loans, Investments,  Guarantees, Etc. Borrower shall not, directly
or  indirectly,  make any loans or advance  money or property to any person,  or
invest in (by  capital  contribution,  dividend  or  otherwise)  or  purchase or
repurchase the stock or indebtedness or all or a substantial  part of the assets
or property of any person, or guarantee,  assume,  endorse,  or otherwise become
responsible  for  (directly  or  indirectly)  the   indebtedness,   performance,
obligations  or  dividends  of any  Person or agree to do any of the  foregoing,
except:  (a) the  endorsement  of  instruments  for collection or deposit in the
ordinary  course  of  business;   (b)  investments  in:  (i)  short-term  direct
obligations of the United States  Government,  (ii)  negotiable  certificates of
deposit issued by any bank  satisfactory to Lender,  payable to the order of the
Borrower or to bearer and delivered to Lender,  and (iii) commercial paper rated
A1 or P1; provided,  that, as to any of the foregoing  investments to the extent
constituting Collateral, unless waived in writing by Lender, Borrower shall take
such actions as are deemed necessary by Lender to perfect the security  interest
of Lender in such  investments;  (c) loans by Borrower to Leer  permitted  under
Section 9.11(b) below;  and (d) the loans,  advances and guarantees set forth on
Schedule 9.10 hereto; provided, that, as to such loans, advances and guarantees,
(i) Borrower shall not,  directly or  indirectly,  (A) amend,  modify,  alter or
change  the  terms of such  loans,  advances  or  guarantees  or any  agreement,
document or instrument  related thereto,  or (B) as to such guarantees,  redeem,
retire, defease,  purchase or otherwise acquire the obligations arising pursuant
to such  guarantees,  or set aside or  otherwise  deposit or invest any sums for
such purpose,  and (ii) Borrower  shall furnish to Lender all notices or demands
in connection  with such loans,  advances or  guarantees  or other  indebtedness
subject  to such  guarantees  either  received  by  Borrower  or on its  behalf,
promptly  after the  receipt  thereof,  or sent by  Borrower  or on its  behalf,
concurrently with the sending thereof, as the case may be.

         9.11  Restricted Payments.

               (a) Borrower shall not,  directly or  indirectly,  declare or pay
any dividends on account of any shares of class of capital stock of Borrower now
or hereafter outstanding, or set



                                       41

<PAGE>



aside or  otherwise  deposit  or invest  any sums for such  purpose,  or redeem,
retire,  defease,  purchase  or  otherwise  acquire  any  shares of any class of
capital  stock (or set aside or  otherwise  deposit  or invest any sums for such
purpose) for any consideration other than common stock or apply or set apart any
sum, or make any other  distribution  (by  reduction of capital or otherwise) in
respect of any such shares or agree to do any of the foregoing.

               (b) Borrower may pay dividends on account of any shares of common
stock of  Borrower  now  outstanding,  or make any  loans  or  advance  money or
property to Leer, provided, that, in each case as to any of the foregoing,  each
of the following  conditions is satisfied as determined by Lender: (i) as of the
date of the  payment of such  dividend  or making  such loan,  and after  giving
effect  thereto,  no Event of  Default,  or act,  condition  or event which with
notice or  passage of time or both would  constitute  an Event of Default  shall
exist  or  have  occurred  and  be  continuing,  (ii)  any  dividends  or  other
distributions  shall  be  out  of  funds  legally  available   therefor,   (iii)
immediately  after  giving  effect to the payment of such  dividend or making of
such loan,  as the case may be, the aggregate  amount of all such  dividends and
loans in any fiscal year of Borrower  shall not exceed the amount equal to fifty
(50%)  percent  of the  positive  Consolidated  Net  Income of  Borrower  in the
immediately  preceding  fiscal  year  calculated  based  on the  annual  audited
financial  statements of JBPCO, Inc. for such fiscal year delivered to Lender in
accordance with Section 9.6(a)(ii) hereof, (iv) as of the date of the payment of
such dividend or making such loan, the daily average of the Excess  Availability
for the immediately  preceding  thirty (30)  consecutive day period shall be not
less than the amount equal to two (2) times the amount of the trade payables and
other current  liabilities of Borrower as of the last day of the preceding month
for which Lender has received monthly financial  statements  pursuant to Section
9.6(a)(i) above, as set forth in such monthly financial statements and as of the
date of such  dividend or loan,  and after  giving  effect  thereto,  the Excess
Availability shall not be less than such amount and (v) no Loans shall have been
outstanding on each of the sixty (60) days  immediately  prior to the payment of
such dividend or making of such loan.

         (c)  Borrower  may repay the  indebtedness  of Borrower to Leer arising
after the date hereof permitted under Section 9.9(f) above,  provided,  that, as
to any such payment each of the following conditions is satisfied: (i) as of the
date of such repayment and after giving effect thereto,  no Event of Default, or
act,  condition  or event  which  with  notice or  passage of time or both would
constitute  an Event of Default  shall exist or have  occurred and be continuing
and (ii) as of the date of such  repayment,  the  daily  average  of the  Excess
Availability  for the immediately  preceding  thirty (30) consecutive day period
shall not be less than the amount equal to two (2) times the amount of the trade
payables  and other  current  liabilities  of Borrower as of the last day of the
preceding  month for which  Lender has  received  monthly  financial  statements
pursuant to Section  9.6(a)(i)  above,  as set forth in such  monthly  financial
statements  and as of the  date of  such  repayment,  and  after  giving  effect
thereto, the Excess Availability shall not be less than such amount.

         9.12  Transactions  with  Affiliates.  Borrower shall not,  directly or
indirectly,  (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director,



                                       42

<PAGE>



agent or other  Affiliate,  except in the ordinary course of and pursuant to the
reasonable  requirements  of  Borrower's  business and upon fair and  reasonable
terms  no less  favorable  to the  Borrower  than  Borrower  would  obtain  in a
comparable arm's length transaction with a person who is not an Affiliate or (b)
make any payments of  management,  consulting  or other fees for  management  or
similar  services,  or of  any  indebtedness  owing  to any  officer,  employee,
shareholder,  director  or other  Affiliate  of Borrower  except (i)  reasonable
compensation  to officers,  employees  and  directors  for services  rendered to
Borrower in the ordinary  course of business,  (ii) payments for management fees
and  reimbursements  for costs,  charges or expenses by Borrower to Southwestern
Holdings, Inc. in accordance with the terms of the Management Services Agreement
(as in effect on the date hereof or as amended after date hereof to increase the
amount  payable by  Borrower  thereunder  by up to $100,000  each  year),  (iii)
payments by Borrower to JBPCO pursuant to the tax sharing  arrangements  between
Borrower  (as in effect on the date  hereof);  provided,  that,  (A) Borrower is
included  in the  consolidated  federal  income tax return  filed by JBPCO as to
which Borrower is making such  payments,  (B) the payments in any year shall not
exceed the federal income tax liability that Borrower would have been liable for
if Borrower had filed its tax returns on a stand-alone  basis, (C) such payments
shall be made by  Borrower  no  earlier  than five (5) days prior to the date on
which  JBPCO would be required  to make its  payments  to the  Internal  Revenue
Service,  and (D) in the event that Borrower also joins with JBPCO in filing any
combined or  consolidated  (or similar) state or local income tax returns,  then
the  making of  payments  to JBPCO  shall be  allowed  in a manner as similar as
possible to that provided  herein with respect to federal  income taxes and (iv)
payments  by Borrower  to Leer in respect of  indebtedness  owing by Borrower to
Leer to the extent permitted under Section 9.11(c) hereof.

         9.13  Additional  Bank  Accounts.   Borrower  shall  not,  directly  or
indirectly,  open, establish or maintain any deposit account, investment account
or any other account with any bank or other  financial  institution,  other than
the Blocked Accounts and the accounts set forth in Schedule 6.3 hereto,  except:
(a)  as to any  new  or  additional  Blocked  Accounts  and  other  such  new or
additional  accounts which contain any Collateral or proceeds thereof,  with the
prior written consent of Lender and subject to such conditions thereto as Lender
may  establish  and (b) as to any accounts  used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.

         9.14  Compliance  with ERISA.  Borrower  shall not with  respect to any
Plan:  (a)  terminate  any such Plan so as to incur any liability to the Pension
Benefit Guaranty Corporation under Section 4041(c) of ERISA; (b) allow or suffer
to exist any non-exempt prohibited transaction involving any of such Plan or any
trust created  thereunder which would subject Borrower or any ERISA Affiliate to
a tax or penalty or other material liability on prohibited  transactions imposed
under Section 4975 of the Code or under ERISA;  (c) fail to pay to any such Plan
any contribution which it is obligated to pay under ERISA, the Code or the terms
of such Plan; (d) allow or suffer to exist any accumulated  funding  deficiency,
whether or not  waived,  with  respect to any such Plan;  (e) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty



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<PAGE>



Corporation  of any such  Plan  under  Section  4042 of ERISA or (f)  incur  any
withdrawal liability with respect to any multiemployer pension plan in excess of
$500,000.

         9.15  Costs and  Expenses.  Borrower  shall pay to Lender on demand all
costs,  expenses,  filing fees and taxes paid or payable in connection  with the
preparation,   negotiation,  execution,  delivery,  recording,   administration,
collection,  liquidation,  enforcement and defense of the Obligations,  Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents  which may  hereafter be  contemplated  (whether or not executed) or
entered  into in  respect  hereof  and  thereof,  including:  (a) all  costs and
expenses of filing or recording  (including  Uniform  Commercial  Code financing
statement  filing  taxes  and fees,  documentary  taxes,  intangibles  taxes and
mortgage recording taxes and fees, if applicable);  (b) all insurance  premiums,
appraisal  fees and  search  fees;  (c) costs and  expenses  of  remitting  loan
proceeds,  collecting  checks and other items of payment,  and  establishing and
maintaining the Blocked Accounts,  together with Lender's  customary charges and
fees with respect thereto; (d) charges,  fees or expenses charged by any bank or
issuer in  connection  with the Letter of Credit  Accommodations;  (e) costs and
expenses of preserving  and protecting  the  Collateral;  (f) costs and expenses
paid or  incurred  in  connection  with  obtaining  payment of the  Obligations,
enforcing  the  security  interests  and liens of Lender,  selling or  otherwise
realizing upon the  Collateral,  and otherwise  enforcing the provisions of this
Agreement  and the other  Financing  Agreements  or defending any claims made or
threatened  against Lender arising out of the transactions  contemplated  hereby
and thereby  (including  preparations for and consultations  concerning any such
matters);  (g) all out-of-pocket  expenses and costs heretofore and from time to
time  hereafter   incurred  by  Lender  during  the  course  of  periodic  field
examinations of the Collateral and Borrower's operations, plus a per diem charge
at the rate of $600 per person per day for  Lender's  examiners in the field and
office;  and  (h)  the  fees  and  disbursements  of  counsel  (including  legal
assistants) to Lender in connection with any of the foregoing.

         9.16 Further Assurances.  At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly  executed and  delivered,  such  further  agreements,  documents  and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements.  Lender may
at any time and from  time to time  request a  certificate  from an  officer  of
Borrower  representing that all conditions  precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such  request by Lender,  Lender may, at its option,  cease to make any
further  Loans or provide  any  further  Letter of Credit  Accommodations  until
Lender has received such  certificate  and, in addition,  Lender has  determined
that such  conditions are satisfied.  Where  permitted by law,  Borrower  hereby
authorizes  Lender  to  execute  and file one or more UCC  financing  statements
signed only by Lender with respect to the Collateral.





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<PAGE>



SECTION 10.          EVENTS OF DEFAULT AND REMEDIES

         10.1 Events of Default.  The occurrence or existence of any one or more
of the  following  events are  referred to herein  individually  as an "Event of
Default", and collectively as "Events of Default":

               (a) (i) Borrower or any Obligor  fails to pay when due any of the
Obligations  or (ii)  Borrower or any Obligor  fails to perform any of covenants
contained in Sections 9.1, 9.2, 9.3, 9.4, 9.6 and 9.14 hereof,  and such failure
shall continue for ten (10) days, provided, that, such ten (10) day period shall
not apply in the case of:  (A) any  failure  to  observe  any such  covenant  or
agreement which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure  within the  immediately
preceding six (6) months or (B) an intentional breach by Borrower or any Obligor
of any such  covenant or  agreement  or (iii)  Borrower or any Obligor  fails to
perform any of the terms, covenants,  conditions or provisions contained in this
Agreement or any of the other Financing  Agreements to which it is a party other
than those described in Sections 10.1(a)(i) or 10.1(a)(ii);

               (b) any  representation,  warranty or  statement  of fact made by
Borrower to Lender in this  Agreement,  the other  Financing  Agreements  or any
other agreement, schedule,  confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;

               (c) any Obligor  revokes,  terminates  or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee,  endorsement or
other agreement of such party in favor of Lender;

               (d) any  judgment  for the payment of money is  rendered  against
Borrower  or any  Obligor  (other  than a judgment  for which  Borrower  or such
Obligor  is fully  insured  and for  which  the  insurer  has  acknowledged  its
liability therefor in writing) in excess of $50,000 in any one case or in excess
of $100,000 in the  aggregate and shall remain  undischarged  or unvacated for a
period  in excess of  thirty  (30)  days or  execution  shall at any time not be
effectively  stayed,  or any  judgment  other than for the payment of money,  or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;

               (e)  Borrower or any  Obligor,  which is a  partnership,  limited
liability company, limited liability partnership or a corporation,  dissolves or
suspends or discontinues doing business;

               (f) Borrower or any Obligor becomes insolvent (however defined or
evidenced),  makes an assignment  for the benefit of  creditors,  makes or sends
notice of a bulk  transfer  or calls a meeting  of its  creditors  or  principal
creditors in connection with any deferral or moratorium with respect to payments
on, or compromise of, or settlement or reduction in  indebtedness  owing to such
creditors;



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<PAGE>



               (g) a case or proceeding  under the bankruptcy laws of the United
States  of  America  now  or  hereafter  in  effect  or  under  any  insolvency,
reorganization,  receivership,  readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed  against  Borrower  or any Obligor or all or any part of its
properties and such petition or application is not dismissed  within  forty-five
(45) days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;

               (h) a case or proceeding  under the bankruptcy laws of the United
States  of  America  now  or  hereafter  in  effect  or  under  any  insolvency,
reorganization,  receivership,  readjustment of debt, dissolution or liquidation
law or statute of any  jurisdiction now or hereafter in effect (whether at a law
or equity)  is filed by  Borrower  or any  Obligor or for all or any part of its
property; or

               (i) any default by Borrower or any Obligor  under any  agreement,
document or instrument  relating to any indebtedness for borrowed money owing to
any  person  other than  Lender  (including,  without  limitation,  the  Secured
Subordinated   Promissory  Note  issued  by  Borrower  payable  to  Seller,  the
Non-Competition  Agreement  between  Borrower and Seller and the Asset  Purchase
Agreement between Borrower and Seller),  or any capitalized  lease  obligations,
contingent  indebtedness  in connection  with any  guarantee,  letter of credit,
indemnity  or  similar  type of  instrument  in favor of any  person  other than
Lender,  in any case in an amount in excess of $80,000,  which default continues
for more than the applicable cure period,  if any, with respect thereto,  or any
default by Borrower or any Obligor under any material contract,  lease,  license
or other obligation to any person other than Lender, which default continues for
more than the applicable cure period, if any, with respect thereto;

               (j)   any Change of Control;

               (k) the  indictment or  threatened  indictment of Borrower or any
Obligor  (as  Lender  may  reasonably  and in good  faith  determine)  under any
criminal  statute,  or  commencement  or threatened  commencement of criminal or
civil proceedings against Borrower or any Obligor,  pursuant to which statute or
proceeding the penalties or remedies sought or available  include  forfeiture of
any material portion of the property of Borrower or such Obligor;

               (l) after the date hereof any act, condition or event shall exist
or have occurred which has a material adverse affect upon the assets of Borrower
or any Obligor, or the Collateral or the value thereof, or the ability of Lender
to realize thereon, or the rights and remedies of Lender under this Agreement or
the other  Financing  Agreements  or the  ability of  Borrower or any Obligor to
repay the  Obligations or of Borrower or any Obligor to perform its  obligations
under this Agreement or any of the other Financing Agreements; or




                                       46

<PAGE>



               (m) there  shall  have  occurred  and be  continuing  an event of
default under any of the other Financing Agreements.

         10.2  Remedies.

               (a) At any time an Event of Default exists or has occurred and is
continuing,  Lender  shall  have  all  rights  and  remedies  provided  in  this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by  Borrower or any  Obligor,  except as such notice or consent is
expressly  provided  for  hereunder or required by  applicable  law. All rights,
remedies  and  powers  granted  to  Lender  hereunder,  under  any of the  other
Financing  Agreements,  the Uniform Commercial Code or other applicable law, are
cumulative,   not   exclusive   and   enforceable,   in   Lender's   discretion,
alternatively,  successively,  or concurrently on any one or more occasions, and
shall include,  without limitation,  the right to apply to a court of equity for
an  injunction  to  restrain a breach or  threatened  breach by Borrower of this
Agreement or any of the other Financing  Agreements.  Lender may, at any time or
times,  proceed  directly  against  Borrower  or  any  Obligor  to  collect  the
Obligations without prior recourse to the Collateral.

               (b)  Without  limiting  the  foregoing,  at any  time an Event of
Default exists or has occurred and is continuing,  Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided,  that, upon the occurrence of any
Event of Default  described  in Sections  10.1(g) and 10.1(h),  all  Obligations
shall  automatically  become immediately due and payable),  (ii) with or without
judicial process or the aid or assistance of others,  enter upon any premises on
or in which any of the  Collateral  may be located  and take  possession  of the
Collateral  or  complete  processing,  manufacturing  and  repair  of all or any
portion of the Collateral,  (iii) require Borrower,  at Borrower's  expense,  to
assemble and make  available to Lender any part or all of the  Collateral at any
place  and  time  designated  by  Lender,  (iv)  collect,  foreclose,   receive,
appropriate,  setoff and realize upon any and all Collateral,  (v) remove any or
all of the  Collateral  from any premises on or in which the same may be located
for the purpose of effecting the sale,  foreclosure or other disposition thereof
or for any other  purpose,  (vi)  sell,  lease,  transfer,  assign,  deliver  or
otherwise dispose of any and all Collateral  (including  entering into contracts
with respect thereto,  public or private sales at any exchange,  broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing  being free from any right or equity of redemption of
Borrower,  which right or equity of  redemption is hereby  expressly  waived and
released  by Borrower  and/or  (vii)  terminate  this  Agreement.  If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations  shall not be reduced as a result thereof until payment therefor
is finally  collected  by Lender.  If notice of  disposition  of  Collateral  is
required by law,  ten (10) days prior  notice by Lender to Borrower  designating
the time and place of any public sale or the time after  which any private  sale
or other intended disposition of Collateral is to be



                                       47

<PAGE>



made,  shall be deemed to be reasonable  notice thereof and Borrower  waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks  recovery of any  Collateral  by way of  prejudgment  remedy,  Borrower
waives the posting of any bond which might otherwise be required.

               (c) Lender may apply the cash  proceeds  of  Collateral  actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations,  in whole or in part and in such order
as Lender may elect,  whether or not then due.  Borrower  shall remain liable to
Lender for the payment of any  deficiency  with  interest  at the  highest  rate
provided for herein and all costs and  expenses of  collection  or  enforcement,
including attorneys' fees and legal expenses.

               (d) Without  limiting the  foregoing,  upon the  occurrence of an
Event of Default or an event  which with notice or passage of time or both would
constitute an Event of Default and for so long as the same is continuing, Lender
may, at its option,  without  notice,  (i) cease making  Loans or arranging  for
Letter of Credit  Accommodations  or reduce the  lending  formulas or amounts of
Loans and Letter of Credit  Accommodations  available  to  Borrower  and/or (ii)
suspend the  effectiveness of any provision of this Agreement  providing for any
future  Loans  or  Letter  of  Credit  Accommodations  to be made by  Lender  to
Borrower.


SECTION 11.          JURY TRIAL WAIVER; OTHER WAIVERS
                     AND CONSENTS; GOVERNING LAW

         11.1 Governing  Law;  Choice of Forum;  Service of Process;  Jury Trial
Waiver.

               (a)  The  validity,   interpretation   and  enforcement  of  this
Agreement and the other Financing  Agreements and any dispute arising out of the
relationship  between the parties hereto,  whether in contract,  tort, equity or
otherwise,  shall be  governed  by the  internal  laws of the  State of New York
(without giving effect to principles of conflicts of law).

               (b)  Borrower  and Lender  irrevocably  consent and submit to the
non-exclusive  jurisdiction of the Supreme Court of the State of New York in New
York County and the United States  District  Court for the Southern  District of
New York and waive any  objection  based on venue or forum non  conveniens  with
respect to any action instituted  therein arising under this Agreement or any of
the other  Financing  Agreements  or in any way  connected  with or  related  or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other  Financing  Agreements or the  transactions  related  hereto or
thereto, in each case whether now existing or hereafter arising,  and whether in
contract,  tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts  described above (except that
Lender shall have the right to bring any action or proceeding  against  Borrower
or its  property  in the courts of any other  jurisdiction  which  Lender  deems
necessary or appropriate in



                                       48

<PAGE>



order to realize on the  Collateral or to otherwise  enforce its rights  against
Borrower or its property).

               (c)  Borrower  hereby  waives  personal  service  of any  and all
process  upon it and  consents  that all such  service of process may be made by
certified mail (return receipt  requested)  directed to its address set forth on
the  signature  pages hereof and service so made shall be deemed to be completed
ten (10) days after the same shall have been so deposited in the U.S. mails, or,
at Lender's option,  by service upon Borrower in any other manner provided under
the rules of any such  courts.  Within  thirty  (30) days  after  such  service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.

               (d) BORROWER AND LENDER EACH HEREBY WAIVES TO THE FULLEST  EXTENT
PERMITTED  BY LAW ANY  RIGHT TO TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION OR
CAUSE OF ACTION (i) ARISING UNDER THIS  AGREEMENT OR ANY OF THE OTHER  FINANCING
AGREEMENTS  OR (ii) IN ANY WAY  CONNECTED  WITH OR RELATED OR  INCIDENTAL TO THE
DEALINGS OF THE PARTIES  HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER
FINANCING  AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY
OR OTHERWISE.  BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN  EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

               (e) Lender shall not have any  liability to Borrower  (whether in
tort,  contract,  equity or  otherwise)  for  losses  suffered  by  Borrower  in
connection  with,  arising out of, or in any way related to the  transactions or
relationships  contemplated  by this  Agreement,  or any act,  omission or event
occurring  in  connection  herewith,  unless  it is  determined  by a final  and
non-appealable  judgment or court order binding on Lender,  that the losses were
the  result  of acts or  omissions  constituting  gross  negligence  or  willful
misconduct.  In any such litigation,  Lender shall be entitled to the benefit of
the rebuttable  presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.

         11.2  Waiver of  Notices.  Borrower  hereby  expressly  waives  demand,
presentment,  protest and notice of protest and notice of dishonor  with respect
to any and all instruments and commercial  paper,  included in or evidencing any
of the Obligations or the Collateral,  and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein.



                                       49

<PAGE>



No notice to or demand on Borrower  which Lender may elect to give shall entitle
Borrower to any other or further notice or demand in the same,  similar or other
circumstances.

         11.3  Amendments and Waivers.  Neither this Agreement nor any provision
hereof shall be amended,  modified,  waived or discharged orally or by course of
conduct,  but only by a written  agreement  signed by an  authorized  officer of
Lender,  and as to  amendments,  as also  signed  by an  authorized  officer  of
Borrower.  Lender shall not, by any act, delay,  omission or otherwise be deemed
to have expressly or impliedly waived any of its rights,  powers and/or remedies
unless such waiver  shall be in writing and signed by an  authorized  officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein.  A waiver by Lender of any right,  power and/or remedy on any one
occasion  shall not be construed as a bar to or waiver of any such right,  power
and/or remedy which Lender would otherwise have on any future occasion,  whether
similar in kind or otherwise.

         11.4 Waiver of  Counterclaims.  Borrower waives all rights to interpose
any  claims,  deductions,  setoffs or  counterclaims  of any nature  (other then
compulsory  counterclaims)  in any  action or  proceeding  with  respect to this
Agreement,  the Obligations,  the Collateral or any matter arising  therefrom or
relating hereto or thereto.

         11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors,  agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities,  costs or expenses imposed on, incurred by
or  asserted   against  any  of  them  in   connection   with  any   litigation,
investigation,  claim or  proceeding  commenced  or  threatened  related  to the
negotiation,  preparation,  execution,  delivery,  enforcement,  performance  or
administration  of  this  Agreement,  any  other  Financing  Agreements,  or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act,  omission,  event  or  transaction  related  or  attendant  thereto,
including  amounts paid in settlement,  court costs, and the reasonable fees and
reasonable  expenses of counsel except for any loss, claim,  damage,  liability,
costs or expense  resulting from the gross  negligence or willful  misconduct of
Lender  as  determined  pursuant  to a  final  non-appealable  order  of a court
competent jurisdiction. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public  policy,  Borrower  shall pay the maximum  portion which it is
permitted to pay under  applicable law to Lender in  satisfaction of indemnified
matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.


SECTION 12.          TERM OF AGREEMENT; MISCELLANEOUS

         12.1 Term.

               (a) This  Agreement  and the  other  Financing  Agreements  shall
become  effective  as of the date set forth on the first  page  hereof and shall
continue in full force and effect for a term



                                       50

<PAGE>



ending on the date three (3) years from the date  hereof (the  "Renewal  Date"),
and from year to year thereafter, unless sooner terminated pursuant to the terms
hereof;  provided,  that, Lender may, at its option,  extend the Renewal Date to
the date four (4) years from the date hereof by giving  Borrower notice at least
sixty (60) days prior to the third (3rd)  anniversary of this Agreement.  Lender
or Borrower  (subject to Lender's  right to extend the Renewal  Date as provided
above) may terminate this Agreement and the other Financing Agreements effective
on the Renewal  Date or on the  anniversary  of the Renewal  Date in any year by
giving  to the  other  party at least  sixty  (60) days  prior  written  notice;
provided,  that,  this  Agreement  and all other  Financing  Agreements  must be
terminated simultaneously. Upon the effective date of termination or non-renewal
of the  Financing  Agreements,  Borrower  shall  pay to  Lender,  in  full,  all
outstanding  and unpaid  Obligations and shall furnish cash collateral to Lender
in such amounts as Lender  determines are reasonably  necessary to secure Lender
from loss, cost,  damage or expense,  including  reasonable  attorneys' fees and
legal expenses, in connection with any contingent Obligations,  including issued
and  outstanding  Letter of Credit  Accommodations  and checks or other payments
provisionally  credited to the Obligations and/or as to which Lender has not yet
received  final and  indefeasible  payment.  Such  payments  in  respect  of the
Obligations  and cash  collateral  shall be remitted by wire transfer in Federal
funds to such  bank  account  of  Lender,  as  Lender  may,  in its  discretion,
designate in writing to Borrower for such purpose.  Interest  shall be due until
and  including  the next Business Day, if the amounts so paid by Borrower to the
bank account  designated  by Lender are received in such bank account later than
12:00 noon, New York City time.

               (b) No  termination  of this  Agreement  or the  other  Financing
Agreements  shall  relieve  or  discharge  Borrower  of its  respective  duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all  Obligations  have been fully and  finally  discharged  and paid,  and
Lender's  continuing  security  interest  in the  Collateral  and the rights and
remedies  of  Lender  hereunder,   under  the  other  Financing  Agreements  and
applicable  law,  shall  remain in effect until all such  Obligations  have been
fully and finally  discharged and paid. Upon the receipt by Lender of payment in
full in cash or other immediately  available funds of all of the outstanding and
unpaid Obligations and cash collateral as provided for in Section 12.1(a),  upon
Borrower's  request and at Borrower's  expense,  except as otherwise required by
applicable law,  Lender shall execute and deliver to Borrower UCC-3  termination
statements  and such other release  documents  with respect to the Collateral as
may be reasonably requested by Borrower,  in form and substance  satisfactory to
Lender,  to effectuate  the  termination  of the security  interests  granted by
Borrower or any Obligor to Lender herein and in the other Financing Agreements.

               (c) If for any reason this  Agreement is terminated  prior to the
end of the then current term or renewal term of this Agreement at the request of
Borrower  or by Lender  as the  result  of an Event of  Default,  in view of the
impracticality  and extreme  difficulty of  ascertaining  actual  damages and by
mutual agreement of the parties as to a reasonable  calculation of Lender's lost
profits  as a  result  thereof,  Borrower  agrees  to pay to  Lender,  upon  the
effective date of such termination, an early termination fee in the amount equal
to: (i) three (3%) percent of the Maximum Credit if such  termination  occurs on
or prior to the first anniversary of the date hereof;



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<PAGE>



(ii) two (2%) percent of the Maximum Credit if such termination occurs after the
first anniversary of the date hereof,  but prior to or on the second anniversary
of the date  hereof;  and (iii) one (1%)  percent of the Maximum  Credit if such
termination  occurs after the second  anniversary  date,  but prior to the third
anniversary of the date hereof,  or if Lender exercises its option to extend the
Renewal  Date  pursuant to Section 12.1 of this  Agreement,  prior to the fourth
anniversary of the date hereof;  provided, that, in the event of the termination
by Borrower of the financing arrangements provided for herein upon the amendment
of the existing financing arrangements of JBPCO with Lender pursuant to the Loan
and Security  Agreement,  dated June 28, 1996,  by and among  Lender,  JBPCO and
certain of its Subsidiaries to add Borrower as a guarantor thereunder,  together
with such other agreements, documents and instruments in connection therewith as
Lender may  require  (including,  without  limitation,  agreements  relating  to
intercompany lending arrangements between Borrower and JBPCO, and the assignment
thereof to Lender),  Borrower shall not be required to pay the early termination
fee provided for above. Nothing contained herein or otherwise shall be construed
to  require  Lender to agree to any such  amendment  to the  existing  financing
arrangements  of Lender with JBPCO and certain of its  Subsidiaries.  Such early
termination  fee shall be  presumed  to be the  amount of damages  sustained  by
Lender as a result of such early  termination  and  Borrower  agrees  that it is
reasonable under the circumstances currently existing. In addition, Lender shall
be entitled to such early  termination  fee upon the  occurrence of any Event of
Default  described in Sections  10.1(g) and 10.1(h) hereof,  even if Lender does
not exercise its right to terminate this Agreement,  but elects,  at its option,
to provide  financing to Borrower or permit the use of cash collateral under the
United States  Bankruptcy  Code. The early  termination fee provided for in this
Section 12.1 shall be deemed included in the Obligations.

         12.2 Notices.  All notices,  requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief  executive  office set forth below (with a copy to J.B.  Poindexter  &
Co., Inc., 1100 Louisiana Street, Houston, Texas 77002,  Attention:  Mr. Stephen
Magee), or to such other address as either party may designate by written notice
to the other in  accordance  with this  provision,  and (b)  deemed to have been
given or made: if delivered in person,  immediately upon delivery;  if by telex,
telegram  or  facsimile   transmission,   immediately   upon  sending  and  upon
confirmation of receipt; if by nationally  recognized  overnight courier service
with  instructions  to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days after
mailing.

         12.3 Partial Invalidity.  If any provision of this Agreement is held to
be invalid or  unenforceable,  such  invalidity  or  unenforceability  shall not
invalidate  this Agreement as a whole,  but this Agreement shall be construed as
though  it did not  contain  the  particular  provision  held to be  invalid  or
unenforceable  and the rights and  obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

         12.4 Successors. This Agreement, the other Financing Agreements and any
other document  referred to herein or therein shall be binding upon and inure to
the benefit of and be



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<PAGE>



enforceable  by Lender,  Borrower and their  respective  successors and assigns,
except that Borrower may not assign its rights under this  Agreement,  the other
Financing  Agreements  and any other  document  referred  to  herein or  therein
without  the prior  written  consent  of Lender.  Lender  may,  after  notice to
Borrower,  assign its rights and delegate its  obligations  under this Agreement
and the other  Financing  Agreements  and further may, after notice to Borrower,
assign, or sell  participations  in, all or any part of the Loans, the Letter of
Credit  Accommodations  or  any  other  interest  herein  to  another  financial
institution or other person,  in which event, the assignee or participant  shall
have,  to the extent of such  assignment or  participation,  the same rights and
benefits as it would have if it were the Lender  hereunder,  except as otherwise
provided by the terms of such assignment or participation.

          12.5  Confidentiality.

               (a) Lender shall use all reasonable efforts to keep confidential,
in  accordance   with  its  customary   procedures  for  handling   confidential
information  and safe and sound lending  practices,  any non-public  information
supplied  to it by  Borrower  pursuant  to this  Agreement  which is clearly and
conspicuously  marked as confidential at the time such  information is furnished
by Borrower to Lender,  provided, that, nothing contained herein shall limit the
disclosure of any such information: (i) to the extent required by statute, rule,
regulation,   subpoena  or  court  order,  (ii)  to  bank  examiners  and  other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Lender is a party,  (iv) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee  or  participant)  shall  have  first  agreed in  writing to treat such
information  as  confidential  in  accordance  with this Section 12.5, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).

               (b) In no event shall this Section 12.5 or any other provision of
this  Agreement  or  applicable  law be  deemed:  (i) to  apply  to or  restrict
disclosure  of  information  that has been or is made  public by Borrower or any
third party without  breach of this Section 12.5 or otherwise  become  generally
available  to the public  other than as a result of a  disclosure  in  violation
hereof,  (ii) to apply to or  restrict  disclosure  of  information  that was or
becomes available to Lender on a non-confidential basis from a person other than
Borrower,  (iii) require Lender to return any materials furnished by Borrower to
Lender or (iv) prevent Lender from responding to routine informational  requests
in  accordance  with the Code of Ethics for the  Exchange of Credit  Information
promulgated  by The  Robert  Morris  Associates  or  other  applicable  industry
standards  relating to the exchange of credit  information.  The  obligations of
Lender under this Section 12.5 shall  supersede and replace the  obligations  of
Lender under any confidentiality letter signed prior to the date hereof.


         12.6 Entire Agreement.  This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be  delivered  in  connection  herewith or  therewith  represents  the entire
agreement and understanding concerning



                                       53

<PAGE>



the subject matter hereof and thereof between the parties hereto,  and supersede
all  other  prior  agreements,  understandings,  negotiations  and  discussions,
representations,   warranties,  commitments,  proposals,  offers  and  contracts
concerning the subject matter hereof,  whether oral or written.  In the event of
any  inconsistency  between  the terms of this  Agreement  and any  schedule  or
exhibit hereto, the terms of this Agreement shall govern.






                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]




                                       54

<PAGE>


         IN WITNESS  WHEREOF,  Lender and Borrower have caused these presents to
be duly executed as of the day and year first above written.


LENDER                                                 BORROWER

CONGRESS FINANCIAL CORPORATION                         RADCO INDUSTRIES, INC.

By:                                                    By:

Title:                                                 Title:

Address:                                               Chief Executive Office:

1133 Avenue of the Americas                            122 Highway 25, N.E.
New York, New York 10036                               Brainerd, Minnesota 56401
===============================                        =========================



                                       55

<PAGE>
                                   [10/30/97]

                    INTERCREDITOR AND SUBORDINATION AGREEMENT


         THIS   INTERCREDITOR   AND  SUBORDINATION   AGREEMENT   ("Intercreditor
Agreement")  dated as of October 31, 1997, is by and between CONGRESS  FINANCIAL
CORPORATION,  a California corporation ("Senior Creditor" as hereinafter further
defined) and MIDWEST TRUCK AFTER MARKET,  INC., an Oklahoma corporation ("Junior
Creditor" as hereinafter  further defined).  Senior Creditor and Junior Creditor
are sometimes  individually  referred to herein as a "Creditor" and collectively
as "Creditors."


                              W I T N E S S E T H:


         WHEREAS,  Junior  Creditor  has  sold  to  Radco  Industries,  Inc.,  a
Minnesota  corporation  ("Debtor" as hereinafter further defined)  substantially
all  of  its  business,  assets  and  properties  and in  connection  with  such
acquisition,  Debtor  has  incurred  certain  indebtedness  in favor  of  Junior
Creditor,  which  indebtedness  is secured by certain  assets and  properties of
Debtor; and

         WHEREAS,  Senior  Creditor  has  entered  or is  about  to  enter  into
financing arrangements with Debtor,  pursuant to which Senior Creditor may, upon
certain  terms  and   conditions,   make  loans  and  provide  other   financial
accommodations to Debtor secured by certain assets and properties of Debtor; and

         WHEREAS, Creditors desire to enter into this Intercreditor Agreement to
(i) confirm the relative priority of the security  interests of each Creditor in
the assets and properties of Debtor,  (ii) provide for the orderly sharing among
Creditors,  in accordance with such  priorities,  of proceeds of such assets and
properties upon any foreclosure thereon or other disposition  thereof, and (iii)
agree upon the terms of the subordination of the obligations of Debtor to Junior
Creditor and related matters;

         NOW THEREFORE,  in  consideration  of the mutual  benefits  accruing to
Creditors hereunder and other good and valuable  consideration,  the receipt and
sufficiency of which is hereby acknowledged,  the parties hereto do hereby agree
as follows:


1.       DEFINITIONS

         As used above and in this Intercreditor  Agreement, the following terms
shall have the meanings ascribed to them below:

         1.1  "Agreements"  shall  mean,   collectively,   the  Senior  Creditor
Agreements and the Junior Creditor Agreements.


                                       -1-

<PAGE>



         1.2  "Collateral"  shall  mean all of the  property  and  interests  in
property,  real or  personal,  tangible or  intangible,  now owned or  hereafter
acquired by Debtor in or upon which  either or both of Creditors at any time has
a Lien, and  including,  without  limitation,  all proceeds of such property and
interests in property.

         1.3 "Creditors"  shall mean,  collectively,  Senior Creditor and Junior
Creditor and their respective successors and assigns.

         1.4 "Debtor" shall mean Radco Industries, Inc., a Minnesota corporation
and its  successors  and assigns,  including,  without  limitation,  a receiver,
trustee  or  debtor-in-possession  on behalf of such  person or on behalf of any
such successor or assign.

         1.5 "Junior  Creditor" shall mean Midwest Truck After Market,  Inc., an
Oklahoma corporation and its successors and assigns.

         1.6 "Junior Creditor Agreements" shall mean, collectively,  the Secured
Subordinated  Promissory  Note,  dated of even date  herewith,  issued by Debtor
payable to Junior  Creditor in the original  principal  amount of $500,000,  the
Security  Agreement,  dated of even date herewith,  by Debtor in favor of Junior
Creditor,  as all of the  foregoing  now  exist  or may  hereafter  be  amended,
modified, supplemented, extended, renewed, restated or replaced.

         1.7  "Junior  Debt"  shall  mean  all   obligations,   liabilities  and
indebtedness  of every kind,  nature and  description  owing by Debtor to Junior
Creditor,  including principal,  interest, charges, fees, premiums,  indemnities
and  expenses,  however  evidenced,  whether  as  principal,  surety,  endorser,
guarantor or otherwise,  arising under the Junior Creditor  Agreements,  whether
now existing or hereafter arising,  whether arising before,  during or after the
initial or any  renewal  term of the  Junior  Creditor  Agreements  or after the
commencement  of any case with respect to Debtor under the U.S.  Bankruptcy Code
or any similar  statute  (and  including,  without  limitation,  any  principal,
interest,  fees, costs, expenses and other amounts,  whether or not such amounts
are  allowable  in whole or in part,  in any such case or  similar  proceeding),
whether direct or indirect, absolute or contingent, joint or several, due or not
due,  primary or secondary,  liquidated or  unliquidated,  secured or unsecured,
provided,  that, the term "Junior Debt" shall not include indebtedness of Debtor
to William J. Avery,  Sr. pursuant to the  Non-Competition  Agreement,  dated of
even date herewith, by and between Debtor and William J. Avery, Sr.

         1.8  "Lien"   shall  mean  any   mortgage,   deed  of  trust,   pledge,
hypothecation,  assignment, deposit arrangement,  security interest, encumbrance
(including,  but not limited to,  easements,  rights of way and the like),  lien
(statutory  or other),  security  agreement  or transfer  intended as  security,
including  without  limitation,  any  conditional  sale or other title retention
agreement, the interest of a lessor under a capital lease or any financing lease
having substantially the same economic effect as any of the foregoing.


                                       -2-

<PAGE>



         1.9   "Person"   or   "person"   shall   mean  any   individual,   sole
proprietorship,  partnership,  corporation  (including,  without imitation,  any
corporation  which elects subchapter S status under the Internal Revenue Code of
1986, as amended),  limited liability  company,  limited liability  partnership,
business trust,  unincorporated  association,  joint stock company, trust, joint
venture,  or other entity or any government or any agency or  instrumentality or
political subdivision thereof.

         1.10 "Senior  Creditor" shall mean Congress  Financial  Corporation,  a
California corporation,  and its successors and assigns (and including any other
lender or group of lenders that at any time refinances,  replaces or succeeds to
all or any  portion  of the  Senior  Debt or is  otherwise  party to the  Senior
Creditor Agreements).

         1.11 "Senior Creditor  Agreements" shall mean,  collectively,  the Loan
and  Security  Agreement,  dated of even date  herewith,  by and between  Senior
Creditor and Debtor and all  agreements,  documents and  instruments at any time
executed and/or  delivered by Debtor or any other person to, with or in favor of
Senior  Creditor  in  connection  therewith  or related  thereto,  as all of the
foregoing  now  exist  or may  hereafter  be  amended,  modified,  supplemented,
extended, renewed, restated,  refinanced,  replaced or restructured (in whole or
in part and including any agreements with, to or in favor of any other lender or
group of lenders that at any time refinances, replaces or succeeds to all or any
portion of the Senior Debt).

         1.12 "Senior Debt" shall mean any and all obligations,  liabilities and
indebtedness  of every kind,  nature and  description  owing by Debtor to Senior
Creditor and/or its affiliates or participants,  including principal,  interest,
charges, fees, premiums, indemnities and expenses, however evidenced, whether as
principal,  surety,  endorser,  guarantor  or  otherwise,  arising  under Senior
Creditor Agreements,  whether now existing or hereafter arising, whether arising
before,  during or after the initial or any renewal term of the Senior  Creditor
Agreements  or after the  commencement  of any case with respect to Debtor under
the U.S.  Bankruptcy  Code or any state  insolvency law or similar  statute (and
including,  without limitation,  any principal,  interest, fees, costs, expenses
and other amounts, which would accrue and become due but for the commencement of
such case,  whether or not such  amounts are allowed or allowable in whole or in
part in any such case),  whether  direct or  indirect,  absolute or  contingent,
joint  or  several,  due  or  not  due,  primary  or  secondary,  liquidated  or
unliquidated, secured or unsecured.

         1.13 All terms defined in the Uniform  Commercial  Code as in effect in
the State of New York,  unless otherwise  defined herein shall have the meanings
set forth  therein.  All  references to any term in the plural shall include the
singular  and all  references  to any term in the  singular  shall  include  the
plural.

         2.  SECURITY INTERESTS; PRIORITIES; REMEDIES

         2.1 Each Creditor hereby  acknowledges that the other Creditor has been
granted a Lien upon the Collateral.

                                       -3-

<PAGE>



         2.2 Notwithstanding the order or time of attachment, or the order, time
or manner of  perfection,  or the order or time of filing or  recordation of any
document or  instrument,  or other method of  perfecting a security  interest in
favor of each Creditor in any Collateral,  and  notwithstanding  any conflicting
terms or conditions  which may be contained in any of the Agreements,  the Liens
upon the  Collateral  of Senior  Creditor  have and shall have priority over the
Liens upon the Collateral of Junior  Creditor and such Liens of Junior  Creditor
are and shall be,  in all  respects,  subject  and  subordinate  to the Liens of
Senior Creditor therein to the full extent of the Senior Debt.

         2.3 The lien priorities provided in Section 2.2 shall not be altered or
otherwise  affected  by  any  amendment,  modification,  supplement,  extension,
renewal,  restatement  or  refinancing  of either the Senior  Debt or the Junior
Debt,  nor by any action or inaction which any Creditor may take or fail to take
in respect of the Collateral.

         2.4 Each  Creditor  shall be  solely  responsible  for  perfecting  and
maintaining  the  perfection  of its Lien in and to each item  constituting  the
Collateral  in which  such  Creditor  has been  granted  a Lien.  The  foregoing
provisions of this Agreement are intended  solely to govern the respective  lien
priorities as between the Creditors and shall not impose on Senior  Creditor any
obligations  in respect of the  disposition  of proceeds of  foreclosure  on any
Collateral  which would conflict with prior perfected claims therein in favor of
any other  person  or any  order or  decree  of any court or other  governmental
authority or any applicable  law. Each Creditor  agrees that it will not contest
the  validity,  perfection,  priority  or  enforceability  of the Liens upon the
Collateral of the other Creditor and that as between Senior  Creditor and Junior
Creditor, the terms of this Intercreditor Agreement shall govern even if part or
all of the Senior Debt or the Liens securing payment and performance thereof are
not perfected or are avoided,  disallowed, set aside or otherwise invalidated in
any judicial proceeding or otherwise.

         2.5 Senior Creditor shall have the exclusive  right to manage,  perform
and  enforce the terms of the Senior  Creditor  Agreements  with  respect to the
Collateral  on which it has a Lien, to exercise and enforce all  privileges  and
rights  thereunder  according to its discretion and the exercise of its business
judgment,  including,  without limitation, the exclusive right to take or retake
control or possession of such Collateral and to hold, prepare for sale, process,
sell, lease, dispose of, or liquidate such Collateral.

         2.6  Notwithstanding  anything to the contrary  contained in any of the
Agreements,  only Senior Creditor shall have the right to restrict or permit, or
approve or disapprove,  the sale, transfer or other disposition of Collateral in
which it has a Lien.  Junior Creditor shall (a) immediately  upon the request of
Senior Creditor,  release or otherwise  terminate its Liens on the Collateral to
the extent such  Collateral  is sold or  otherwise  disposed of either by Senior
Creditor,  its agents,  or Debtor with the consent of Senior Creditor and Junior
Creditor shall immediately deliver such release documents as Senior Creditor may
require in connection therewith,  provided, that such release by Junior Creditor
shall not extend to or  otherwise  affect any of the  rights,  if any, of Junior
Creditor to the proceeds from any such sale or other  disposition  of Collateral
and

                                       -4-

<PAGE>



(b) be deemed to have  consented  under the Junior  Creditor  Agreements to such
sale or other disposition.

         2.7  Notwithstanding  any rights or  remedies  available  to a Creditor
under any of the Agreements,  applicable law or otherwise, Junior Creditor shall
not, directly or indirectly, (a) seek to collect from Debtor (including, without
limitation, from or by way of any Collateral) any of the Junior Debt or exercise
any of its rights or remedies upon a default or event of default by Debtor under
the Junior Creditor Agreements or otherwise, or (b) seek to foreclose or realize
upon  (judicially  or  non-judicially)  its Lien on any Collateral or assert any
claims  or  interests  therein  (including,  without  limitation,  by  setoff or
notification  of account  debtors),  or (c)  commence  any action or  proceeding
against Debtor or its  properties  under the U.S.  Bankruptcy  Code or any state
insolvency law or similar  present or future  statute,  law or regulation or any
proceedings  for  voluntary  liquidation,  dissolution  or other  winding  up of
Debtor's business, or the appointment of any trustee, receiver or liquidator for
Debtor  or any part of its  properties  or any  assignment  for the  benefit  of
creditors or any  marshalling of assets of Debtor,  or (d) take any other action
against Debtor and the  Collateral.  The foregoing shall not in any way limit or
impair the right of Junior  Creditor from bidding for and purchasing  Collateral
at any private or judicial  foreclosure upon such Collateral initiated by Senior
Creditor.

         3.  SUBORDINATION OF JUNIOR DEBT

         3.1  Subordination.  Except as  specifically  set forth in Section  3.2
below, Junior Creditor hereby subordinates its right to payment and satisfaction
of the Junior Debt and the payment thereof, directly or indirectly, by any means
whatsoever, is deferred, to the indefeasible payment and satisfaction in full of
all Senior Debt.

          3.2  Permitted   Payments.   Senior   Creditor   hereby  agrees  that,
notwithstanding  anything to the contrary  contained in Section 3.1,  unless and
until the  occurrence  of an Event of  Default  (as such term is  defined in the
Senior Creditor Agreements), Debtor may make and Junior Creditor may receive and
retain from Debtor regularly scheduled payments of principal and interest, on an
unaccelerated  basis, in respect of the Junior Debt in accordance with the terms
of the Junior  Creditor  Agreements as in effect on the date hereof (but not any
prepayments,  non-mandatory payments or any payments pursuant to acceleration or
claims of breach or to acquire any Junior Debt or otherwise); provided, that, as
of the date of each  such  payment  and  after  giving  effect  thereto,  Excess
Availability (as such term is defined in the Senior Creditor  Agreements)  shall
be not less than $100,000.

         3.3  Distributions.

                  (a)  In  the   event  of  any   distribution,   division,   or
application,  partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Debtor or the proceeds thereof
to the creditors of Debtor or readjustment  of the obligations and  indebtedness
of  Debtor,   whether  by  reason  of  liquidation,   bankruptcy,   arrangement,
receivership,

                                       -5-

<PAGE>



assignment for the benefit of creditors,  marshalling of assets of Debtor or any
other action or proceeding  involving the readjustment of all or any part of the
indebtedness or other  obligations of Debtor or the application of the assets of
Debtor to the payment or liquidation  thereof,  or upon the dissolution or other
winding up of Debtor's business, or upon the sale of all or substantially all of
Debtor's  assets,  then, and in any such event,  (i) Senior Creditor shall first
receive  indefeasible payment in full in cash of all of the Senior Debt prior to
the  payment of all or any part of the Junior  Debt,  and (ii)  Senior  Creditor
shall  be  entitled  to  receive  any  payment  or  distribution  of any kind or
character,  whether in cash,  securities or other property,  which be payable or
deliverable in respect of any or all of the Junior Debt.

                  (b) In order to enable  Senior  Creditor to enforce its rights
under Section 3.3(a) above, Senior Creditor is hereby irrevocably authorized and
empowered (in its own name or in the name of Junior Creditor or otherwise),  but
shall have no obligation to, enforce claims comprising any of the Junior Debt by
proof of debt,  proof of claim,  suit or otherwise and take generally any action
which Junior  Creditor might  otherwise be entitled to take, as Senior  Creditor
may deem  necessary or advisable for the  enforcement of its rights or interests
hereunder.

                  (c) To the extent necessary for Senior Creditor to realize the
benefits of the  subordination of the Junior Debt provided for herein (including
the right to receive any  payment and  distributions  which might  otherwise  be
payable or deliverable in respect of the Junior Debt in any proceeding described
in Section  3.3(a) or otherwise),  Junior  Creditor shall execute and deliver to
Senior Creditor such instruments or documents (together with such assignments or
endorsements  as Senior Creditor shall deem  necessary),  as may be requested by
Senior Creditor.

         3.4 Payments Received by Junior Creditor.  Except for payments received
by Junior  Creditor  as  provided  in Section  3.2 above,  should any payment or
distribution or security or instrument or proceeds thereof be received by Junior
Creditor in respect of the Junior Debt,  Junior  Creditor shall receive and hold
the same in trust, as trustee,  for the benefit of Senior  Creditor,  segregated
from other funds and property of Junior Creditor and shall forthwith deliver the
same to Senior  Creditor  (together with any endorsement or assignment of Junior
Creditor  where  necessary),  for  application to any of the Senior Debt. In the
event of the  failure of the Junior  Creditor  to make any such  endorsement  or
assignment  to Senior  Creditor,  Senior  Creditor,  or any of its  officers  or
employees,  are hereby  irrevocably  authorized on behalf of Junior  Creditor to
make the same.

         3.5  Instrument  Legend  and  Notation.  Any  instrument  at  any  time
evidencing the Junior Debt, or any portion thereof,  shall be permanently marked
on its face with a legend  conspicuously  indicating  that  payment  thereof  is
subordinate  in right of payment to the Senior Debt and subject to the terms and
conditions  of this  Intercreditor  Agreement,  and (a)  after  being so  marked
certified  copies  thereof  shall be  delivered  to Senior  Creditor and (b) the
original  of any  such  instrument  shall be  immediately  delivered  to  Senior
Creditor upon Senior Creditor's  request, at any time on or after the occurrence
of an  Event  of  Default  as  such  term  is  defined  in the  Senior  Creditor
Agreements. In the event any legend or endorsement is omitted, Senior

                                       -6-

<PAGE>



Creditor or any of its officers or employees,  are hereby irrevocably authorized
on behalf of Junior  Creditor  to make the same.  No  specific  legend,  further
assignment or endorsement or delivery of notes,  guarantees or instruments shall
be necessary to subject any Junior Debt to the  subordination  thereof contained
in this Agreement.

         4.   COVENANTS, REPRESENTATIONS AND WARRANTIES

         4.1 Additional Covenants of Junior Creditor and Debtor. Junior Creditor
and Debtor agree in favor of Senior Creditor that:

                  (a) except as  specifically  set forth in  Section  3.2 above,
Debtor shall not,  directly or indirectly,  make and Junior  Creditor shall not,
directly or  indirectly,  accept or receive any payment of principal or interest
or  any  prepayment  or  non-mandatory   payment  or  any  payment  pursuant  to
acceleration  or claims  of breach or any  payment  to  acquire  Junior  Debt or
otherwise in respect of any Junior Debt;

                  (b) Junior Creditor and Debtor shall not amend,  modify, alter
or change  in any  material  respect  the  terms of any of the  Junior  Creditor
Agreements or any other arrangements related to the Junior Debt;

                  (c) Junior  Creditor  and Debtor  shall,  at any time or times
upon the request of Senior Creditor, promptly furnish to Senior Creditor a true,
correct and complete statement of the outstanding Junior Debt;

                  (d) Junior  Creditor and Debtor  shall  execute and deliver to
Senior Creditor such additional  agreements,  documents and instruments and take
such further actions as may be reasonably  necessary or desirable in the opinion
of  Senior   Creditor  to  effectuate   the  provisions  and  purposes  of  this
Intercreditor Agreement.

         4.2 Additional  Covenant of Junior Creditor.  Junior Creditor agrees in
favor of Senior  Creditor that Junior Creditor shall not sell,  assign,  pledge,
encumber or otherwise  dispose of any of the Junior Debt,  except,  that, Junior
Creditor  may assign all of the Junior Debt to William J. Avery,  Sr. so long as
on or prior to such  assignment,  Senior  Creditor shall have received from such
assignee a written  acknowledgment  of  receipt of a copy of this  Intercreditor
Agreement  together with the written agreement of William J. Avery, Sr., in form
and  substance  satisfactory  to Senior  Creditor,  to be bound by the terms and
conditions of this Intercreditor Agreement.

         4.3 Additional  Representations  and Warranties of Junior  Creditor and
Debtor.  Junior  Creditor and Debtor  represent  and warrant to Senior  Creditor
that:

          (a) as of the date hereof,  the total  principal  amount of the Junior
     Debt is $500,000; and


                                       -7-

<PAGE>



          (b) as of the date  hereof,  no default or event of default,  or event
     which with notice or passage of time or both would  constitute  an event of
     default exists or has occurred under the Junior Creditor Agreements.

         4.4  Additional  Representations  and  Warranties  of Junior  Creditor.
Junior Creditor agrees in favor of Senior Creditor that:

          (a) Junior Creditor is the exclusive legal and beneficial owner of all
     of the Junior Debt;

          (b) none of the Junior Debt is subject to any lien, security interest,
     financing statements or assignment;

          (c) this  Intercreditor  Agreement  constitutes  the legal,  valid and
     binding obligations of Junior Creditor,  enforceable in accordance with its
     terms.

         4.5  Additional  Representation  of Senior  Creditor.  Senior  Creditor
represents to Junior Creditor that, as of the date hereof, the maximum amount of
loans available to Debtor under the Senior Creditor Agreements is $5,000,000.

         4.6 Waivers. Notice of acceptance hereof, the making of loans, advances
and extensions of credit or other financial accommodations to, and the incurring
of any expenses by or in respect of, Debtor by Senior Creditor, and presentment,
demand,  protest,  notice of protest,  notice of  nonpayment  or default and all
other  notices to which  Junior  Creditor  and Debtor are or may be entitled are
hereby waived (except as expressly  provided for herein or as to Debtor,  in the
Senior Creditor  Agreements).  Junior Creditor also waives notice of, and hereby
consents to, (a) any amendment,  modification,  supplement, renewal, restatement
or extensions of time of payment of or increase or decrease in the amount of any
of the Senior Debt or to the Senior Creditor  Agreements or any Collateral,  (b)
the taking, exchange, surrender and releasing of Collateral or guarantees now or
at any time held by or available  to Senior  Creditor for the Senior Debt or any
other  person at any time liable for or in respect of the Senior  Debt,  (c) the
exercise of, or refraining from the exercise of any rights against Debtor or any
other obligor or any Collateral,  (d) the settlement,  compromise or release of,
or the waiver of any default with respect to, any of the Senior Debt, and/or (e)
Senior  Creditor's  election,  in  any  proceeding  instituted  under  the  U.S.
Bankruptcy Code, of the application of Section 1111(b)(2) of the U.S. Bankruptcy
Code. Any of the foregoing shall not, in any manner,  affect the terms hereof or
impair the  obligations  of Junior  Creditor  hereunder.  All of the Senior Debt
shall  be  deemed  to  have  been  made  or  incurred  in  reliance   upon  this
Intercreditor Agreement.

         4.7 Subrogation;  Marshalling.  Junior Creditor shall not be subrogated
to, or be entitled to any assignment of any Senior Debt or Junior Debt or of any
Collateral or guarantees or evidence of any thereof until all of the Senior Debt
is  indefeasibly  paid and satisfied in full.  Junior Creditor hereby waives any
and all rights to have any Collateral or any part thereof

                                       -8-

<PAGE>



granted to Senior Creditor  marshalled upon any foreclosure or other disposition
of such collateral by Senior Creditor or Debtor.

         4.8 No Offset.  In the event  Junior  Creditor  at any time  incurs any
obligation to pay money to Debtor,  Junior  Creditor hereby  irrevocably  agrees
that it shall pay such obligation in cash or cash equivalents in accordance with
the terms of the contract governing such obligation and shall not deduct from or
setoff  against any amounts owed by the Junior  Creditor to Debtor in connection
with any such  transaction any amounts such of Junior Creditor claims are due to
it with respect to the Junior Debt.

         5.   MISCELLANEOUS

         5.1 Amendments. Any waiver, permit, consent or approval by any Creditor
of or under any provision, condition or covenant to this Intercreditor Agreement
must be in writing and shall be effective  only to the extent it is set forth in
writing and as to the  specific  facts or  circumstances  covered  thereby.  Any
amendment of this Intercreditor  Agreement must be in writing and signed by each
of the parties to be bound thereby.

         5.2  Successors and Assigns.

                  (a) This  Intercreditor  Agreement  shall be binding  upon the
parties  hereto and their  respective  successors and assigns and shall inure to
the benefit of each of Creditors and its respective successors, participants and
assigns.

                  (b) Senior Creditor reserves the right to grant participations
in, or otherwise sell, assign,  transfer or negotiate all or any part of, or any
interest in, the Senior Debt and the Collateral securing same;  provided,  that,
Junior  Creditor  shall not be  obligated to give any notices to or otherwise in
any  manner  deal  directly  with  any  participant  in the  Senior  Debt and no
participant shall be entitled to any rights or benefits under this Intercreditor
Agreement except through Senior Creditor.  In connection with any  participation
or other  transfer  or  assignment,  Senior  Creditor  (i) may  disclose to such
assignee,  participant  or  other  transferee  or  assignee  all  documents  and
information  which Senior  Creditor now or  hereafter  may have  relating to the
Senior Debt or the  Collateral  and (ii) shall  disclose to such  participant or
other  transferee  or assignee the  existence  and terms and  conditions of this
Intercreditor Agreement.

                  (c) In  connection  with any  assignment or transfer of any or
all of the Senior Debt, or any or all rights of Senior  Creditor in the property
of Debtor (other than pursuant to a  participation),  Junior  Creditor agrees to
execute and deliver an agreement  containing  terms  substantially  identical to
those  contained  herein in favor of any such  assignee  or  transferee  and, in
addition,  will execute and deliver an agreement  containing terms substantially
identical to those contained  herein in favor of any third person who refinances
or succeeds to or replaces any or all of Senior Creditor's  financing of Debtor,
whether such successor financing or replacement occurs by transfer,  assignment,
"takeout" or any other means or vehicle.

                                       -9-

<PAGE>



         5.3 Insolvency.  This Intercreditor  Agreement shall be applicable both
before and after the filing of any petition by or against  Debtor under the U.S.
Bankruptcy Code and all converted or succeeding  cases in respect  thereof,  and
all references herein to Debtor shall be deemed to apply to a trustee for Debtor
and Debtor as  debtor-in-possession.  The relative rights of Senior Creditor and
Junior   Creditor  to  repayment  of  the  Senior  Debt  and  the  Junior  Debt,
respectively, and in or to any distributions from or in respect of Debtor or any
Collateral or proceeds of Collateral, shall continue after the filing thereof on
the same basis as prior to the date of the petition,  subject to any court order
approving  the  financing  of,  or  use  of  cash   collateral   by,  Debtor  as
debtor-in-possession.

         5.4  Bankruptcy  Financing.   If  Debtor  shall  become  subject  to  a
proceeding  under the U.S.  Bankruptcy  Code and if Senior  Creditor  desires to
permit the use of cash collateral or to provide financing to Debtor under either
Section 363 or Section 364 of the U.S.  Bankruptcy Code,  Junior Creditor agrees
as follows:  (a) adequate notice to Junior Creditor shall have been provided for
such financing or use of cash collateral if Junior Creditor  receives notice two
(2) business days prior to the entry of the order  approving  such  financing or
use of cash collateral and (b) no objection will be raised by Junior Creditor to
any such  financing  or use of cash  collateral  on the  ground of a failure  to
provide  "adequate  protection"  for  Junior  Creditor's  junior  Liens  on  the
Collateral or any other grounds,  provided Junior Creditor retains a Lien on the
post-petition  Collateral  with  the  same  priority  as  existed  prior  to the
commencement of the proceeding  under the U.S.  Bankruptcy Code. For purposes of
this Section,  notice of a proposed financing or use of cash collateral shall be
deemed  given when given,  in the manner  prescribed  by Section 5.5 hereof,  to
Junior Creditor.

         5.5  Notices.  All  notices,  requests  and  demands  to  or  upon  the
respective  parties  hereto  shall be in writing and shall be deemed duly given,
made or received:  if  delivered in person,  immediately  upon  delivery;  if by
telex,  telegram or facsimile  transmission,  immediately  upon sending and upon
confirmation of receipt; if by nationally  recognized  overnight courier service
with  instructions  to deliver the next business day, one (1) business day after
sending;  and if mailed by certified mail,  return receipt  requested,  five (5)
days after mailing to the parties at their addresses set forth below (or to such
other  addresses as the parties may designate in accordance  with the provisions
of this Section):

         To Senior Creditor:                Congress Financial Corporation
                                            1133 Avenue of the Americas
                                            New York, New York  10036
                                            Attention:  Mr. Andrew J. Robin

         To Junior Creditor:                Midwest Truck After Market, Inc.
                                            P.O. Box 1405
                                            Flagler Beach, Florida  32156
                                            Attention: Mr. William J. Avery, Sr.


                                      -10-

<PAGE>



Either  Creditor may change the  address(es) to which all notices,  requests and
other  communications  are to be sent by giving  written  notice of such address
change to the other  Creditor in  conformity  with this  Section  5.5,  but such
change shall not be effective  until notice of such change has been  received by
the other Creditors.

         5.6 Counterparts.  This Intercreditor  Agreement may be executed in any
number of  counterparts,  each of which shall be an original with the same force
and  effect  as if  the  signatures  thereto  and  hereto  were  upon  the  same
instrument.

         5.7  Governing  Law.  The  validity,  construction  and  effect of this
Intercreditor  Agreement  shall be governed by the internal laws of the State of
New York (without giving effect to principles of conflicts of law).

         5.8 Consent to Jurisdiction;  Waiver of Jury Trial. Each of the parties
hereto hereby  irrevocably  consents to the  non-exclusive  jurisdiction  of the
Supreme  Court of the State of New York in New York County and the United States
District Court for the Southern District of New York and waives trial by jury in
any action or proceeding with respect to this Intercreditor Agreement.

         5.9  Complete  Agreement.   This  written  Intercreditor  Agreement  is
intended by the parties as a final expression of their agreement and is intended
as a complete statement of the terms and conditions of their agreement.

         5.10 No Third  Parties  Benefitted.  Except as  expressly  provided  in
Section  5.2,  this  Intercreditor  Agreement  is solely for the  benefit of the
Creditors and their  respective  successors,  participants  and assigns,  and no
other  person  shall have any right,  benefit,  priority or interest  under,  or
because of the existence of, this Intercreditor Agreement.

         5.11  Disclosures;  Non-Reliance.  Each  Creditor has the means to, and
shall in the future  remain,  fully  informed as to the financial  condition and
other  affairs of Debtor and no Creditor  shall have any  obligation  or duty to
disclose any such  information  to any other  Creditor.  Except as expressly set
forth in this  Intercreditor  Agreement,  the parties  hereto have not otherwise
made to each other nor do they hereby make to each other any warranties, express
or implied,  nor do they assume any liability to each other with respect to: (a)
the enforceability,  validity, value or collectability of any of the Junior Debt
or Senior Debt or any  guarantee or security  which may have been granted to any
of them in connection therewith,  (b) Debtor's title to or right to transfer any
of the Collateral, or (c) any other matter except as expressly set forth in this
Intercreditor Agreement.

         5.12 Term. This Intercreditor  Agreement is a continuing  agreement and
shall remain in full force and effect  until the  indefeasible  satisfaction  in
full of all  Senior  Debt  and the  termination  of the  financing  arrangements
between Senior Creditor and Debtor.


                                      -11-

<PAGE>



         IN  WITNESS  WHEREOF,   the  parties  have  caused  this  Intercreditor
Agreement to be duly executed as of the day and year first above written.

                                       CONGRESS FINANCIAL CORPORATION

                                       By:

                                       Title:

                                       MIDWEST TRUCK AFTER MARKET, INC.

                                       By:

                                       Title:


         The undersigned  hereby  acknowledges and agrees to the foregoing terms
and provisions.  By its signature  below,  the undersigned  agrees that it will,
together with its successors and assigns, be bound by the provisions hereof.

         The undersigned  agrees that any Creditor  holding  Collateral which is
also subject to a Lien in favor of the other  Creditor  does so as bailee (under
the UCC) for the  other and is  hereby  authorized  to and may turn over to such
other Creditor upon request therefor any such Collateral,  after all obligations
and  indebtedness of the undersigned to the bailee Creditor have been fully paid
and performed.

         The undersigned  acknowledges and agrees that: (i) although it may sign
this Intercreditor  Agreement it is not a party hereto and does not and will not
receive  any  right,  benefit,  priority  or  interest  under or  because of the
existence  of the  foregoing  Intercreditor  Agreement,  (ii) in the  event of a
breach by the  undersigned or Junior Creditor of any of the terms and provisions
contained  in  the  foregoing  Intercreditor  Agreement,  such  a  breach  shall
constitute  an "Event of  Default"  as defined in and under the Senior  Creditor
Agreements and (iii) it will execute and deliver such  additional  documents and
take such  additional  action as may be necessary or desirable in the opinion of
any  Creditor  to  effectuate  the  provisions  and  purposes  of the  foregoing
Intercreditor Agreement.

                                       RADCO INDUSTRIES, INC.

                                       By:

                                       Title:




                                      -12-