EXHIBIT 10.32
                              M&I THUNDERBIRD BANK
                                 LOAN AGREEMENT
<TABLE>
<CAPTION>
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<S>            <C>         <C>         <C>        <C>    <C>         <C>          <C>      <C>  
Principal      Loan Date   Maturity    Loan No    Call   Collateral  Account      Officer  Initials
$1,000,000.00              07-31-1999  1001 - R1                     09400069235    JLL

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References  in the  shaded  area are for  Lender's  use only and do not limit the  applicability of 
this document to any particular loan or items.
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BORROWER:  RECONDITIONED SYSTEMS, INC.    LENDER:  M&I THUNDERBIRD BANK, AN ARIZONA CORPORATION
           444 WEST FAIRMONT                       SCOTTSDALE RD. & THUNDERBIRD OFFICE (10)
           TEMPE, AZ 85282                         C/O LOAN SUPPORT DEPARTMENT
                                                   ONE EAST CAMELBACK ROAD
                                                   PHOENIX, AZ 85012-1647

===================================================================================================
</TABLE>
THIS LOAN AGREEMENT BETWEEN  RECONDITIONED  SYSTEMS,  INC.  ("BORROWER") AND M&I
THUNDERBIRD BANK, AN ARIZONA CORPORATION  ("LENDER") IS MADE AND EXECUTED ON THE
FOLLOWING TERMS AND  CONDITIONS.  BORROWER HAS RECEIVED PRIOR  COMMERCIAL  LOANS
FROM  LENDER OR HAS APPLIED TO LENDER FOR A  COMMERCIAL  LOAN OR LOANS AND OTHER
FINANCIAL ACCOMMODATIONS,  INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT
OR  SCHEDULE   ATTACHED  TO  THIS  AGREEMENT.   ALL  SUCH  LOANS  AND  FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN"
AND  COLLECTIVELY  AS THE "LOANS."  BORROWER  UNDERSTANDS AND AGREES THAT (A) IN
GRANTING,  RENEWING,  OR EXTENDING ANY LOAN,  LENDER IS RELYING UPON  BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (B)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE
SUBJECT TO LENDER'S SOLE JUDGMENT AND  DISCRETION;  AND (C) ALL SUCH LOANS SHALL
BE AND SHALL  REMAIN  SUBJECT  TO THE  FOLLOWING  TERMS AND  CONDITIONS  OF THIS
AGREEMENT.

TERM.  This Agreement shall be effective as of JULY 31, 1998, and shall continue
thereafter  until all  Indebtedness  of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.

DEFINITIONS.  The following words shall have the following meanings when used in
this  Agreement.  Terms not otherwise  defined in this Agreement  shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar  amounts  shall mean amounts in lawful  money of the United  States of
America.

     AGREEMENT.  The word  "Agreement"  means this Loan Agreement,  as this Loan
     Agreement may be amended or modified  from time to time,  together with all
     exhibits and schedules attached to this Loan Agreement from time to time.

     ACCOUNT. The word "Account" means a trade account,  account receivable,  or
     other  right to  payment  for  goods  sold or  services  rendered  owing to
     Borrower (or to a third party grantor acceptable to Lender).

     ACCOUNT  DEBTOR.  The  words  "Account  Debtor"  mean the  person or entity
     obligated upon an Account.

     ADVANCE.  The word "Advance"  means a disbursement of Loan funds under this
     Agreement.

     BORROWER.  The word "Borrower" means RECONDITIONED  SYSTEMS, INC.. The word
     "Borrower" also includes, as applicable, all subsidiaries and affiliates of
     Borrower  as  provided  below in the  paragraph  titled  "Subsidiaries  and
     Affiliates."

     BORROWING  BASE.  The words  "Borrowing  Base" mean as determined by Lender
     from time to time, the lessor of (a)  $1,000,000.00;  or (b) the sum of (i)
     75.000% of the aggregate amount of Eligible Accounts,  plus (ii) 30.000% of
     the aggregate amount of Eligible Inventory, capped at $300,000.00.

     BUSINESS DAY. The words "Business Day" mean a day on which commercial banks
     are open for business in the State of Arizona.

     CERCLA. The word "CERCLA" means the Comprehensive  Environmental  Response,
     Compensation, and Liability Act of 1980, as amended.

     CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive
     of extraordinary gains and income, plus depreciation and amortization.

     COLLATERAL. The word "Collateral" means and includes without limitation all
     property and assets granted as collateral security for a Loan, whether real
     or personal  property,  whether  granted  directly or  indirectly,  whether
     granted now or in the future, and whether granted in the form of a security
     interest,  mortgage, deed of trust,  assignment,  pledge, chattel mortgage,
     chattel trust,  factor's lien,  equipment  trust,  conditional  sale, trust
     receipt,  lien,  charge,  lien  or  title  retention  contract,   lease  or
     consignment  intended as a security  device,  or any other security or lien
     interest whatsoever,  whether created by law, contract,  or otherwise.  The
     word  "Collateral"  includes  without  limitation all collateral  described
     below in the section titled "COLLATERAL."

     DEBT.  The  word  "Debt"  means  all of  Borrower's  liabilities  excluding
     Subordinated Debt.

     ELIGIBLE ACCOUNTS.  The words "Eligible Accounts" mean, at any time, all of
     Borrower's  Accounts which contain selling terms and conditions  acceptable
     to Lender.  The net amount of any Eligible  Account  against which Borrower
     may borrow shall exclude all returns,  discounts,  credits,  and offsets of
     any  nature.  Unless  otherwise  agreed to by Lender in  writing,  Eligible
     Accounts do not include:

          (a) Accounts  with respect to which the Account  Debtor is an officer,
          an employee or agent of Borrower.

          (b) Accounts with respect to which the Account  Debtor is a subsidiary
          of, or  affiliated  with or related to Borrower  or its  shareholders,
          officers, or directors.

          (c) Accounts  with  respect to which goods are placed on  consignment,
          guaranteed  sale, or other terms by reason of which the payment by the
          Account Debtor may be conditional.

          (d)  Accounts  with  respect  to which  the  Account  Debtor  is not a
          resident of the United States,  except to the extent such Accounts are
          supported by  insurance,  bonds or other  assurances  satisfactory  to
          Lender.

          (e) Accounts with respect to which Borrower is or may become liable to
          the Account Debtor for goods sold or services  rendered by the Account
          Debtor to Borrower.

          (f) Accounts which are subject to dispute, counterclaim, or setoff.

          (g) Accounts  with respect to which the goods have not been shipped or
          delivered,  or the  services  have not been  rendered,  to the Account
          Debtor.

          (h) Accounts  with respect to which  Lender,  in its sole  discretion,
          deems the  creditworthiness  or  financial  condition  of the  Account
          Debtor to be unsatisfactory.


<PAGE>

07-31-1998                       LOAN AGREEMENT                           Page 2
Loan No 1001-R1                   (Continued)
================================================================================

          (i)  Accounts  of any  Account  Debtor  who has filed or has had filed
          against it a petition in bankruptcy or an application for relief under
          any  provision  of any state or  federal  bankruptcy,  insolvency,  or
          debtor-in-relief acts; or who has had appointed a trustee,  custodian,
          or receiver for the assets of such Account Debtor;  or who has made an
          assignment  for the benefit of  creditors  or has become  insolvent or
          fails  generally  to pay its debts  (including  its  payrolls) as such
          debts become due.

          j) Accounts  with  respect to which the  Account  Debtor is the United
          States government or any department or agency of the United States.

          (k) Accounts  which have not been paid in full within 90 DAYS from the
          invoice date. The entire balance of all Accounts of any single Account
          debtor will be  ineligible  whenever the portion of the Account  which
          has not been paid within 90 DAYS from the invoice date is in excess of
          10.000% of the total amount outstanding on the Account.

     ELIGIBLE INVENTORY.  The words "Eligible  Inventory" mean, at any time, all
     of Borrower's Inventory as defined below except:

          (a)  Inventory  which is not owned by  Borrower  free and clear of all
          security interests, liens, encumbrances, and claims of third parties.

          (b)  Inventory  which  Lender,  in its  sole  discretion,  deems to be
          obsolete,   unsalable,   damaged,  defective,  or  unfit  for  further
          processing.

     ERISA. The word "ERISA" means the Employee  Retirement  Income Security Act
     of 1974, as amended.

     EVENT OF DEFAULT.  The words  "Event of Default"  mean and include  without
     limitation  any of the Events of  Default  set forth  below in the  section
     titled "EVENTS OF DEFAULT."

     EXPIRATION DATE. The words  "Expiration  Date" mean the date of termination
     of Lender's commitment to lend under this Agreement.

     GRANTOR.  The word "Grantor" means and includes without limitation each and
     all  of the  persons  or  entities  granting  a  Security  Interest  in any
     Collateral for the Indebtedness, including without limitation all Borrowers
     granting such a Security Interest.

     GUARANTOR.  The word "Guarantor" means and includes without limitation each
     and  all  of  the  guarantors,   sureties,  and  accommodation  parties  in
     connection with any  Indebtedness.  

     INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
     all Loans,  together with all other  obligations,  debts and liabilities of
     Borrower  to Lender,  or any one or more of them,  as well as all claims by
     Lender  against  Borrower,  or any  one or  more of  them;  whether  now or
     hereafter existing,  voluntary or involuntary,  due or not due, absolute or
     contingent,  liquidated  or  unliquidated;  whether  Borrower may be liable
     individually or jointly with others; whether Borrower may be obligated as a
     guarantor,  surety,  or otherwise;  whether recovery upon such Indebtedness
     may be or hereafter  may become barred by any statute of  limitations;  and
     whether  such  Indebtedness  may  be  or  hereafter  may  become  otherwise
     unenforceable.

     INVENTORY. The word "Inventory" means all of Borrowers raw materials,  work
     in process, finished goods, merchandise,  parts and supplies, of every kind
     and  description,  and  goods  held for sale or  lease or  furnished  under
     contracts of service in which  Borrower  now has or hereafter  acquires any
     right,  whether  held by Borrower or others,  and all  documents  of title,
     warehouse receipts,  bills of lading, and all other documents of every type
     covering all or any part of the  foregoing.  Inventory  includes  inventory
     temporarily  out of  Borrower's  custody or  possession  and all returns on
     Accounts.

     LENDER.   The  word  "Lender"  means  M&I  Thunderbird   Bank,  an  Arizona
     corporation, its successors and assigns.

     LINE OF  CREDIT.  The  words  "Line of  Credit"  mean the  credit  facility
     described in the Section titled "LINE OF CREDIT" below.

     LIQUID ASSETS.  The words "Liquid Assets" mean Borrower's cash on hand plus
     Borrower's readily marketable securities.

     LOAN. The word "Loan" or "Loans" means and includes without  limitation any
     and all  commercial  loans  and  financial  accommodations  from  Lender to
     Borrower,  whether  now  or  hereafter  existing,  and  however  evidenced,
     including  without  limitation  those  loans and  financial  accommodations
     described  herein or described on any exhibit or schedule  attached to this
     Agreement from time to time.

     NOTE.  The word "Note" means and  includes  without  limitation  Borrower's
     promissory note or notes, if any, evidencing Borrower's Loan obligations in
     favor of Lender, as well as any substitute, replacement or refinancing note
     or notes therefor.

     RELATED DOCUMENTS.  The words "Related  Documents" mean and include without
     limitation  all  promissory  notes,  credit  agreements,  loan  agreements,
     environmental agreements, guaranties, security agreements, mortgages, deeds
     of trust, and all other instruments,  agreements and documents, whether now
     or hereafter existing, executed in connection with the indebtedness.

     SECURITY AGREEMENT. The words "Security Agreement" mean and include without
     limitation   any    agreements,    promises,    covenants,    arrangements,
     understandings or other agreements,  whether created by law,  contract,  or
     otherwise,  evidencing,  governing,  representing,  or  creating a Security
     Interest.

     SECURITY INTEREST.  The words "Security  Interest" mean and include without
     limitation any type of collateral security,  whether in the form of a lien,
     charge,  mortgage,  deed of trust,  assignment,  pledge,  chattel mortgage,
     chattel trust,  factor's lien,  equipment  trust,  conditional  sale, trust
     receipt, lien or title retention contract, lease or consignment intended as
     a security  device,  or any other  security  or lien  interest  whatsoever,
     whether created by law, contract, or otherwise.

     SARA. The word "SARA" means the Superfund  Amendments  and  Reauthorization
     Act of 1986 as now or hereafter amended.

     SUBORDINATED  DEBT. The words  "Subordinated  Debt" mean  indebtedness  and
     liabilities of Borrower which have been  subordinated by written  agreement
     to indebtedness owed by Borrower to Lender in form and substance acceptable
     to Lender.

     TANGIBLE NET WORTH.  The words "Tangible Net Worth" mean  Borrower's  total
     assets  excluding  all  intangible  assets  (i.e.,  goodwill,   trademarks,
     patents, copyrights, organizational expenses, and similar intangible items,
     but including leaseholds and leasehold improvements) less total Debt.

     WORKING  CAPITAL.  The words  "Working  Capital"  mean  Borrower's  current
     assets, excluding prepaid expenses, less Borrower's current liabilities.

LINE OF CREDIT.  Lender  agrees to make  Advances to Borrower  from time to time
from the date of this Agreement to the Expiration  Date,  provided the aggregate
amount of such  Advances  outstanding  at any time does not exceed the Borrowing
Base.  Within the  foregoing  limits,  Borrower may borrow,  partially or wholly
prepay, and reborrow under this Agreement as follows.

     CONDITIONS  PRECEDENT  TO EACH  ADVANCE.  Lender's  obligation  to make any
     Advance to or for the account of Borrower  under this  Agreement is subject
     to the following  conditions  precedent,  with all documents,  instruments,
     opinions,  reports,  and other items required under this Agreement to be in
     form and substance satisfactory to Lender:

          (a) Lender shall have received  evidence  that this  Agreement and all
          Related Documents have been duly authorized,  executed,  and delivered
          by Borrower to Lender.

          (b) Lender shall have received such opinions of counsel,  supplemental
          opinions, and documents as Lender may request.

          (c) The  security  interests  in the  Collateral  shall have been duly
          authorized,  created, and perfected with first lien priority and shall
          be in full


<PAGE>

07-31-1998                       LOAN AGREEMENT                           Page 3
Loan No 1001-R1                   (Continued)
================================================================================


          force and effect.

          (d) All  guaranties  required  by Lender for the Line of Credit  shall
          have been executed by each Guarantor,  delivered to Lender,  and be in
          full force and effect.

          (e)  Lender,  at its  option  and for its  sole  benefit,  shall  have
          conducted an audit of Borrower's Accounts,  Inventory, books, records,
          and operations, and Lender shall be satisfied as to their condition.

          (f) Borrower shall have paid to Lender all fees,  costs,  and expenses
          specified in this Agreement and the Related  Documents as are then due
          and payable.

          (g) There shall not exist at the time of any Advance a condition which
          would  constitute  an Event  of  Default  under  this  Agreement,  and
          Borrower  shall have  delivered to Lender the  compliance  certificate
          called for in the paragraph below titled "Compliance Certificate."

     MAKING LOAN  ADVANCES.  Advances  under the Line of Credit may be requested
     either  orally or in writing by  authorized  persons.  Lender may, but need
     not,  require that all oral requests be confirmed in writing.  Each Advance
     shall be  conclusively  deemed to have been made at the  request of and for
     the  benefit  of  Borrower  (a) when  credited  to any  deposit  account of
     Borrower maintained with Lender or (b) when advanced in accordance with the
     instructions  of an authorized  person.  Lender,  at its option,  may set a
     cutoff  time,  after which all  requests  for  Advances  will be treated as
     having been requested on the next succeeding Business Day.

     MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount of
     the  outstanding  Advances  shall  exceed the  applicable  Borrowing  Base,
     Borrower, immediately upon written or oral notice from Lender, shall pay to
     Lender an amount equal to the difference between the outstanding  principal
     balance of the Advances and the  Borrowing  Base. On the  Expiration  Date,
     Borrower shall pay to Lender in full the aggregate  unpaid principal amount
     of all Advances then outstanding and all accrued unpaid interest,  together
     with all other applicable fees, costs and charges, if any, not yet paid.

     LOAN  ACCOUNT.  Lender  shall  maintain on its books a record of account in
     which  Lender shall make entries for each Advance and such other debits and
     credits as shall be  appropriate  in connection  with the credit  facility.
     Lender shall  provide  Borrower  with  periodic  statements  of  Borrower's
     account,   which   statements   shall  be  considered  to  be  correct  and
     conclusively  binding on Borrower  unless  Borrower  notifies Lender to the
     contrary  within  thirty  (30) days  after  Borrower's  receipt of any such
     statement which Borrower deems to be incorrect.

COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans,  obligations and duties owed by Borrower to Lender, Borrower (and others,
if  required)  shall grant to Lender  Security  Interests  in such  property and
assets as Lender may require (the  "Collateral"),  including without  limitation
Borrower's  present and future  Accounts,  general  intangibles,  and Inventory.
Lender's  Security  Interests in the  Collateral  shall be continuing  liens and
shall  include the proceeds and products of the  Collateral,  including  without
limitation  the  proceeds  of any  insurance.  With  respect to the  Collateral,
Borrower agrees and represents and warrants to Lender:

     PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such financing
     statements  and to take  whatever  other actions are requested by Lender to
     perfect and continue  Lender's Security  Interests in the Collateral.  Upon
     request  of  Lender,  Borrower  will  deliver  to Lender any and all of the
     documents evidencing or constituting the Collateral, and Borrower will note
     Lender's interest upon any and all chattel paper if not delivered to Lender
     for  possession  by  Lender.  Contemporaneous  with the  execution  of this
     Agreement,  Borrower will execute one or more UCC financing  statements and
     any similar  statements as may be required by applicable law, and will file
     such  financing   statements  and  all  such  similar   statements  in  the
     appropriate  location or locations.  Borrower hereby appoints Lender as its
     irrevocable  attorney-in-fact  for the purpose of executing  any  documents
     necessary to perfect or to continue any  Security  Interest.  Lender may at
     any time, and without further  authorization from Borrower,  file a carbon,
     photograph, facsimile, or other reproduction of any financing statement for
     use as a  financing  statement.  Borrower  will  reimburse  Lender  for all
     expenses  for the  perfection,  termination,  and the  continuation  of the
     perfection  of  Lender's  security  interest  in the  Collateral.  Borrower
     promptly will notify Lender of any change in Borrower's  name including any
     change to the assumed  business  names of Borrower.  Borrower also promptly
     will notify Lender of any change in Borrower's  Social  Security  Number or
     Employer Identification Number. Borrower further agrees to notify Lender in
     writing prior to any change in address or location of Borrower's  principal
     governance  office or should  Borrower merge or consolidate  with any other
     entity.

     COLLATERAL  RECORDS.  Borrower does now, and at all times hereafter  shall,
     keep correct and accurate  records of the Collateral,  all of which records
     shall be  available  to Lender or Lender's  representative  upon demand for
     inspection  and  copying  at  any  reasonable  time.  With  respect  to the
     Accounts,  Borrower  agrees to keep and maintain such records as Lender may
     require,  including  without  limitation  information  concerning  Eligible
     Accounts  and Account  balances and aging.  With respect to the  Inventory,
     Borrower  agrees to keep and  maintain  such records as Lender may require,
     including without limitation  information concerning Eligible Inventory and
     records itemizing and describing the kind, type,  quality,  and quantity of
     Inventory,  Borrower's  Inventory costs and selling  prices,  and the daily
     withdrawals and additions to Inventory.

     COLLATERAL SCHEDULES.  Concurrently with the execution and delivery of this
     Agreement,  Borrower  shall  execute  and  deliver to Lender  schedules  of
     Accounts and Inventory  and Eligible  Accounts and Eligible  Inventory,  in
     form and substance  satisfactory to the Lender.  Thereafter  Borrower shall
     execute  and  deliver to Lender  such  supplemental  schedules  of Eligible
     Accounts  and Eligible  Inventory  and such other  matters and  information
     relating to the Accounts and Inventory as Lender may request.  Supplemental
     schedules shall be delivered  according to the following  schedule:  WITHIN
     FIFTEEN (15) DAYS AFTER EACH MONTH END TO INCLUDE  ACCOUNTS  RECEIVABLE AND
     ACCOUNTS  PAYABLE AGINGS AND BORROWER'S  CERTIFICATION  AND  RECONCILIATION
     FORM.

     REPRESENTATIONS  AND WARRANTIES  CONCERNING  ACCOUNTS.  With respect to the
     Accounts,  Borrower  represents  and  warrants to Lender:  (a) Each Account
     represented  by  Borrower to be an  Eligible  Account for  purposes of this
     Agreement  conforms to the  requirements  of the  definition of an Eligible
     Account;  (b) All Account  information  listed on  schedules  delivered  to
     Lender will be true and correct,  subject to immaterial  variance;  and (c)
     Lender,  its  assigns,  or agents  shall  have the right at any time and at
     Borrower's expense to inspect, examine, and audit Borrower's records and to
     confirm with Account Debtors the accuracy of such Accounts.

     REPRESENTATIONS AND WARRANTIES  CONCERNING  INVENTORY.  With respect to the
     Inventory,  Borrower  represents and warrants to Lender:  (a) All Inventory
     represented  by  Borrower  to be Eligible  Inventory  for  purposes of this
     Agreement  conforms  to the  requirements  of the  definition  of  Eligible
     Inventory; (b) All Inventory values listed on schedules delivered to Lender
     will be true and correct,  subject to immaterial variance; (c) The value of
     the  Inventory  will be determined on a consistent  accounting  basis;  (d)
     Except as agreed  to the  contrary  by  Lender  in  writing,  all  Eligible
     Inventory is now and at all times hereafter will be in Borrower's  physical
     possession  and  shall  not be  held  by  others  on  consignment,  sale on
     approval,  or sale or return:  (e)  Except as  reflected  in the  Inventory
     schedules  delivered to Lender,  all  Eligible  Inventory is now and at all
     times  hereafter  will be of  good  and  merchantable  quality,  free  from
     defects;  (f)  Eligible  Inventory  is not now  and  will  not at any  time
     hereafter be stored with a bailee,  warehouseman,  or similar party without
     Lender's  prior  written  consent,   and,  in  such  event,  Borrower  will
     concurrently  at the time of bailment cause any such bailee,  warehouseman,
     or similar  party to issue and  deliver to Lender,  in form  acceptable  to
     Lender,  warehouse  receipts in  Lender's  name  evidencing  the storage of
     Inventory;  and (g) Lender, its assigns,  or agents shall have the right at
     any time and at Borrower's expense to inspect and examine the Inventory and
     to check and test the same as to quality, quantity, value, and condition.

     REMITTANCE  ACCOUNT.  Borrower  agrees that Lender may at any time  require
     Borrower to institute procedures whereby the payments and other proceeds of
     the  Accounts  shall  be paid by the  Account  Debtors  under a  remittance
     account or lock box arrangement with Lender, or Lender's agent, or with one
     or more  financial  institutions  designated  by Lender.  Borrower  further
     agrees that, if no Event of Default exists under this


<PAGE>

07-31-1998                        LOAN AGREEMENT                          Page 4
Loan No 1001-R1                    (Continued)
================================================================================

     Agreement,  any and all of such  funds  received  under  such a  remittance
     account or lock box  arrangement  shall,  at  Lender's  sole  election  and
     discretion,  either be (a) paid or turned over to Borrower;  (b)  deposited
     into one or more  accounts  for the  benefit  of  Borrower  (which  deposit
     accounts shall be subject to a security assignment in favor of Lender); (c)
     deposited  into one or more  accounts for the joint benefit of Borrower and
     Lender  (which  deposit  accounts  shall  likewise be subject to a security
     assignment  in favor of  Lender);  (d) paid or turned  over to Lender to be
     applied  to the  Indebtedness  in such  order and  priority  as Lender  may
     determine  within  its  sole  discretion;  or (e)  any  combination  of the
     foregoing as Lender shall  determine  from time to time.  Borrower  further
     agrees that,  should one or more Events of Default exist, any and all funds
     received under such a remittance  account or lock box arrangement  shall be
     paid or turned over to Lender to be applied to the  Indebtedness,  again in
     such order and priority as Lender may determine within its sole discretion.

REPRESENTATIONS  AND WARRANTIES.  Borrower represents and warrants to Lender, as
of the  date of this  Agreement,  as of the  date of each  disbursement  of Loan
proceeds, as of the date of any renewal,  extension or modification of any Loan,
and at all times any Indebtedness exists:

     ORGANIZATION.  Borrower is a corporation  which is duly organized,  validly
     existing,  and in good standing  under the laws of the State of Arizona and
     is validly existing and in good standing in all states in which Borrower is
     doing  business.  Borrower  has the full  power  and  authority  to own its
     properties and to transact the businesses in which it is presently  engaged
     or  presently  proposes to engage.  Borrower  also is duly  qualified  as a
     foreign  corporation  and is in good  standing  in all  states in which the
     failure  to so  qualify  would  have  a  material  adverse  effect  on  its
     businesses or financial condition.

     AUTHORIZATION.  The execution,  delivery, and performance of this Agreement
     and all  Related  Documents  by  Borrower,  to the  extent to be  executed,
     delivered  or  performed  by  Borrower,  have been duly  authorized  by all
     necessary action by Borrower; do not require the consent or approval of any
     other  person,  regulatory  authority  or  governmental  body;  and  do not
     conflict with,  result in a violation of, or constitute a default under (a)
     any provision of its articles of incorporation or organization,  or bylaws,
     or any agreement or other instrument  binding upon Borrower or (b) any law,
     governmental regulation, court decree, or order applicable to Borrower.

     FINANCIAL  INFORMATION.  Each financial  statement of Borrower  supplied to
     Lender truly and completely  disclosed  Borrowers financial condition as of
     the date of the statement, and there has been no material adverse change in
     Borrower's  financial  condition  subsequent to the date of the most recent
     financial statement supplied to Lender. Borrower has no material contingent
     obligations except as disclosed in such financial statements.

     LEGAL EFFECT. This Agreement  constitutes,  and any instrument or agreement
     required  hereunder to be given by Borrower when delivered will constitute,
     legal,  valid and  binding  obligations  of  Borrower  enforceable  against
     Borrower in accordance with their respective terms.

     PROPERTIES. Except for Permitted Liens, Borrower owns and has good title to
     all of Borrower's properties free and clear of all Security Interests,  and
     has not executed any security documents or financing statements relating to
     such  properties.  All of  Borrower's  properties  are titled in Borrower's
     legal name,  and  Borrower  has not used,  or filed a  financing  statement
     under, any other name for at least the last five (5) years.

     HAZARDOUS SUBSTANCES.  The terms "hazardous waste," "hazardous  substance,"
     "disposal," "release," and "threatened release," as used in this Agreement,
     shall have the same  meanings  as set forth in the  "CERCLA,"  "SARA,"  the
     Hazardous Materials  Transportation  Act, 49 U.S.C.  Section 1801, et seq.,
     the Resource  Conservation  and Recovery  Act, 42 U.S.C.  Section  6901, et
     seq., or other  applicable  state or Federal laws,  rules,  or  regulations
     adopted  pursuant  to any of the  foregoing.  Except  as  disclosed  to and
     acknowledged by Lender in writing,  Borrower  represents and warrants that:
     (a) During the period of Borrower's ownership of the properties,  there has
     been no use, generation, manufacture, storage, treatment, disposal, release
     or threatened release of any hazardous waste or substance by any person on,
     under,  about or from any of the properties.  (b) Borrower has no knowledge
     of, or  reason  to  believe  that  there has been (i) any use,  generation,
     manufacture,  storage, treatment,  disposal, release, or threatened release
     of any hazardous waste or substance on, under, about or from the properties
     by any prior  owners or  occupants  of any of the  properties,  or (ii) any
     actual  or  threatened  litigation  or  claims  of any  kind by any  person
     relating to such matters. (c) Neither Borrower nor any tenant,  contractor,
     agent  or  other  authorized  user  of  any of the  properties  shall  use,
     generate,  manufacture,  store, treat, dispose of, or release any hazardous
     waste or substance on, under, about or from any of the properties;  and any
     such activity shall be conducted in compliance with all applicable federal,
     state,  and local laws,  regulations,  and  ordinances,  including  without
     limitation those laws, regulations and ordinances described above. Borrower
     authorizes  Lender and its agents to enter upon the properties to make such
     inspections  and  tests  as  Lender  may  deem   appropriate  to  determine
     compliance  of the  properties  with this  section  of the  Agreement.  Any
     inspections or tests made by Lender shall be at Borrower's  expense and for
     Lender's   purposes   only  and  shall  not  be  construed  to  create  any
     responsibility  or  liability  on the part of Lender to  Borrower or to any
     other person. The representations and warranties contained herein are based
     on Borrower's due diligence in  investigating  the properties for hazardous
     waste and hazardous substances. Borrower hereby (a) releases and waives any
     future claims  against  Lender for indemnity or  contribution  in the event
     Borrower becomes liable for cleanup or other costs under any such laws, and
     (b)  agrees to  indemnify  and hold  harmless  Lender  against  any and all
     claims, losses, liabilities,  damages, penalties, and expenses which Lender
     may directly or  indirectly  sustain or suffer  resulting  from a breach of
     this section of the Agreement or as a consequence  of any use,  generation,
     manufacture,   storage,  disposal,  release  or  threatened  release  of  a
     hazardous  waste or substance on the  properties.  The  provisions  of this
     section of the  Agreement,  including the  obligation  to indemnify,  shall
     survive the payment of the  indebtedness  and the termination or expiration
     of this Agreement and shall not be affected by Lender's  acquisition of any
     interest in any of the properties, whether by foreclosure or otherwise.

     LITIGATION AND CLAIMS. No litigation, claim, investigation,  administrative
     proceeding or similar  action  (including  those for unpaid taxes)  against
     Borrower is pending or  threatened,  and no other event has occurred  which
     may  materially   adversely  affect  Borrower's   financial   condition  or
     properties,  other than litigation,  claims,  or other events, if any, that
     have been disclosed to and acknowledged by Lender in writing.

     TAXES. To the best of Borrower's knowledge,  all tax returns and reports of
     Borrower  that are or were required to be filed,  have been filed,  and all
     taxes,  assessments and other governmental  charges have been paid in full,
     except those  presently  being or to be contested by Borrower in good faith
     in the ordinary  course of business and for which  adequate  reserves  have
     been provided.

     LIEN PRIORITY.  Unless otherwise previously disclosed to Lender in writing,
     Borrower  has not  entered  into or granted  any  Security  Agreements,  or
     permitted  the  filing  or  attachment  of  any  Security  Interests  on or
     affecting any of the Collateral  directly or indirectly  securing repayment
     of Borrower's  Loan and Note, that would be prior or that may in any way be
     superior  to  Lender's  Security  Interests  and  rights  in  and  to  such
     Collateral.

     BINDING EFFECT. This Agreement,  the Note, all Security Agreements directly
     or indirectly securing repayment of Borrower's Loan and Note and all of the
     Related  Documents  are binding  upon  Borrower as well as upon  Borrower's
     successors,  representatives  and assigns,  and are legally  enforceable in
     accordance with their respective terms.

     COMMERCIAL  PURPOSES.  Borrower intends to use the Loan proceeds solely for
     business or commercial  related  purposes.  

     EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
     have any liability  complies in all material  respects with all  applicable
     requirements  of law  and  Regulations  and  (i) no  Reportable  Event  nor
     Prohibited  Transaction  (as defined in ERISA) has occurred with respect to
     any such  plan,  (ii)  Borrower  has not  withdrawn  from any such  plan or
     initiated  steps to do so, (iii) no steps have been taken to terminate  any
     such plan,  and (iv)  there are no  unfunded  liabilities  other than those
     previously disclosed to Lender in writing.

     LOCATION OF BORROWER'S  OFFICES AND RECORDS.  Borrower's place of business,
     or Borrower's Chief executive  office,  if Borrower has more than one place
     of  business,  is located at 444 West  Fairmont,  Tempe,  AZ 85282.  Unless
     Borrower has  designated  otherwise  in writing  this  location is also the
     office  or  offices  where  Borrower  keeps  its  records   concerning  the
     Collateral.


<PAGE>

07-31-1998                       LOAN AGREEMENT                           Page 5
Loan No 1001-R1                   (Continued)
================================================================================

     INFORMATION.  All  information  heretofore  or  contemporaneously  herewith
     furnished by Borrower to Lender for the purposes of or in  connection  with
     this  Agreement  or  any  transaction   contemplated  hereby  is,  and  all
     information  hereafter furnished by or on behalf of Borrower to Lender will
     be,  true and  accurate in every  material  respect on the date as of which
     such information is dated or certified;  and none of such information is or
     will be incomplete by omitting to state any material fact necessary to make
     such information not misleading.

     SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
     that Lender, without independent  investigation,  is relying upon the above
     representations  and  warranties  in extending  Loan  Advances to Borrower.
     Borrower further agrees that the foregoing  representations  and warranties
     shall be  continuing  in nature  and shall  remain in full force and effect
     until such time as Borrower's  indebtedness shall be paid in full, or until
     this Agreement shall be terminated in the manner provided above,  whichever
     is the last to occur.

AFFIRMATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that,  while
this Agreement is in effect, Borrower will:

     LITIGATION.  Promptly inform Lender in writing of (a) all material  adverse
     changes in  Borrower's  financial  condition,  and (b) all existing and all
     threatened litigation, claims, investigations administrative proceedings or
     similar actions affecting  Borrower or any Guarantor which could materially
     affect the financial  condition of Borrower or the  financial  condition of
     any Guarantor.

     FINANCIAL  RECORDS.  Maintain  its books and  records  in  accordance  with
     generally accepted  accounting  principles,  applied on a consistent basis,
     and permit Lender to examine and audit  Borrower's books and records at all
     reasonable times.

     FINANCIAL STATEMENTS.  Furnish Lender with, as soon as available, but in no
     event later than one hundred twenty (120) days after the end of each fiscal
     year,  Borrower's  balance  sheet and income  statement for the year ended,
     audited by a certified public  accountant  satisfactory to Lender,  and, as
     soon as  available,  but in no event  later than forty five (45) days after
     the end of each  month,  Borrower's  balance  sheet  and  profit  and  loss
     statement  for the period  ended,  prepared and certified as correct to the
     best knowledge and belief by Borrower's  chief  financial  officer or other
     officer or person  acceptable to Lender.  All financial reports required to
     be provided  under this  Agreement  shall be prepared  in  accordance  with
     generally accepted  accounting  principles,  applied on a consistent basis,
     and certified by Borrower as being true and correct.

     ADDITIONAL INFORMATION. Furnish such additional information and statements,
     lists of assets  and  liabilities,  agings  of  receivables  and  payables,
     inventory  schedules,  budgets,  forecasts,  tax returns, and other reports
     with respect to Borrower's  financial  condition and business operations as
     Lender may request from time to time.

     FINANCIAL  COVENANTS AND RATIOS.  Comply with the  following  covenants and
     ratios:

          TANGIBLE NET WORTH.  Maintain a minimum Tangible Net Worth of not less
          than $1,150,000.00.

          NET WORTH RATIO.  Maintain a Tangible Net Worth in excess of 1.500% of
          Total Assets.

          CURRENT  RATIO.   Maintain  a  ratio  of  Current  Assets  to  Current
          Liabilities in excess of 1.50 to 1.00. 

The following provisions shall apply for purposes of determining compliance with
the foregoing financial covenants and ratios: MONTHLY. Except as provided above,
all computations made to determine compliance with the requirements contained in
this paragraph  shall be made in accordance with generally  accepted  accounting
principles,  applied on a consistent  basis,  and certified by Borrower as being
true and correct.  

     INSURANCE.  Maintain  fire  and  other  risk  insurance,  public  liability
     insurance,  and such other  insurance as Lender may require with respect to
     Borrower's properties and operations, in form, amounts,  coverages and with
     insurance companies reasonably acceptable to Lender. Borrower, upon request
     of  Lender,  will  deliver  to  Lender  from time to time the  policies  or
     certificates  of  insurance  in  form  satisfactory  to  Lender,  including
     stipulations  that coverages will not be canceled or diminished  without at
     least ten (10) days' prior written notice to Lender.  Each insurance policy
     also shall  include an  endorsement  providing  that  coverage  in favor of
     Lender will not be  impaired in any way by any act,  omission or default of
     Borrower or any other  person.  In  connection  with all policies  covering
     assets in which  Lender  holds or is  offered a security  interest  for the
     Loans,  Borrower  will  provide  Lender  with  such loss  payable  or other
     endorsements as Lender may require.

     INSURANCE REPORTS.  Furnish to Lender,  upon request of Lender,  reports on
     each  existing  insurance  policy  showing such  information  as Lender may
     reasonably  request,  including without  limitation the following:  (a) the
     name of the insurer;  (b) the risks insured;  (c) the amount of the policy;
     (d) the properties  insured;  (e) the then current  property  values on the
     basis of which  insurance has been obtained,  and the manner of determining
     those values; and (f) the expiration date of the policy. In addition,  upon
     request of Lender  (however not more often than  annually),  Borrower  will
     have  an  independent  appraiser  satisfactory  to  Lender  determine,   as
     applicable,  the actual cash value or replacement  cost of any  Collateral.
     The cost of such appraisal shall be paid by Borrower.

     OTHER  AGREEMENTS.  Comply  with all  terms  and  conditions  of all  other
     agreements,  whether now or hereafter  existing,  between  Borrower and any
     other  party and notify  Lender  immediately  in writing of any  default in
     connection with any other such agreements.

     LOAN  PROCEEDS.  Use all  Loan  proceeds  solely  for  Borrower's  business
     operations,  unless  specifically  consented  to the  contrary by Lender in
     writing.

     TAXES,   CHARGES  AND  LIENS.  Pay  and  discharge  when  due  all  of  its
     indebtedness and obligations, including without limitation all assessments,
     taxes,  governmental  charges,  levies and liens, of every kind and nature,
     imposed upon Borrower or its properties,  income, or profits,  prior to the
     date on which  penalties  would  attach,  and all lawful  claims  that,  if
     unpaid,  might become a lien or charge upon any of  Borrower's  properties,
     income, or profits.  Provided however, Borrower will not be required to pay
     and discharge any such assessment, tax, charge, levy, lien or claim so long
     as (a) the  legality  of the  same  shall  be  contested  in good  faith by
     appropriate  proceedings,  and (b) Borrower  shall have  established on its
     books  adequate  reserves with respect to such contested  assessment,  tax,
     charge,  levy,  lien,  or  claim  in  accordance  with  generally  accepted
     accounting  practices.  Borrower,  upon demand of Lender,  will  furnish to
     Lender  evidence of payment of the  assessments,  taxes,  charges,  levies,
     liens and claims and will authorize the appropriate  governmental  official
     to deliver to Lender at any time a written  statement  of any  assessments,
     taxes,  charges,  levies,  liens and claims against Borrower's  properties,
     income, or profits.

     PERFORMANCE.  Perform and comply with all terms, conditions, and provisions
     set  forth  in this  Agreement  and in the  Related  Documents  in a timely
     manner,  and promptly notify Lender if Borrower learns of the occurrence of
     any event which  constitutes  an Event of Default  under this  Agreement or
     under any of the Related Documents.

     OPERATIONS.  Maintain executive and management personnel with substantially
     the  same  qualifications  and  experience  as the  present  executive  and
     management  personnel;  provide  written  notice to Lender of any change in
     executive  and  management  personnel;  conduct its  business  affairs in a
     reasonable  and  prudent  manner  and in  compliance  with  all  applicable
     federal,  state and  municipal  laws,  ordinances,  rules  and  regulations
     respecting its properties,  charters, businesses and operations,  including
     without limitation, compliance with the Americans With Disabilities Act and
     with all minimum  funding  standards  and other  requirements  of ERISA and
     other laws applicable to Borrower's employee benefit plans.

     INSPECTION.  Permit employees or agents of Lender at any reasonable time to
     inspect any and all Collateral  for the Loan or Loans and Borrower's  other
     properties and to examine or audit Borrower's books,  accounts, and records
     and to make  copies  and  memoranda  of  Borrower's  books,  accounts,  and
     records.  If Borrower now or at any time  hereafter  maintains  any records
     (including  without  limitation  computer  generated  records and  computer
     software  programs for the generation of such records) in the possession of
     a third party, Borrower, upon request of Lender, shall notify such party to
     permit  Lender free access to such records at all  reasonable  times and to
     provide Lender with copies of any records it may


<PAGE>

07-31-1998                        LOAN AGREEMENT                          Page 6
Loan No 1001-R1                    (Continued)
================================================================================

     request, all at Borrower's expense.

     COMPLIANCE CERTIFICATE.  Unless waived in writing by Lender, provide Lender
     WITHIN  FIFTEEN  (15)  DAYS  AFTER  EACH  MONTH END and at the time of each
     disbursement  of Loan proceeds  with a  certificate  executed by Borrower's
     chief financial  officer,  or other officer or person acceptable to Lender,
     certifying  that  the  representations  and  warranties  set  forth in this
     Agreement  are  true and  correct  as of the  date of the  certificate  and
     further  certifying  that, as of the date of the  certificate,  no Event of
     Default exists under this Agreement.

     ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
     with all environmental  protection federal, state and local laws, statutes,
     regulations and ordinances; not cause or permit to exist, as a result of an
     intentional or unintentional  action or omission on its part or on the part
     of any third  party,  on property  owned and/or  occupied by Borrower,  any
     environmental  activity where damage may result to the environment,  unless
     such  environmental  activity  is pursuant  to and in  compliance  with the
     conditions of a permit issued by the  appropriate  federal,  state or local
     governmental authorities; shall furnish to Lender promptly and in any event
     within  thirty  (30)  days  after  receipt  thereof  a copy of any  notice,
     summons, lien, citation,  directive, letter or other communication from any
     governmental  agency  or  instrumentality  concerning  any  intentional  or
     unintentional  action or omission on Borrower's part in connection with any
     environmental  activity  whether or not there is damage to the  environment
     and/or other natural resources.

     ADDITIONAL ASSURANCES.  Make, execute and deliver to Lender such promissory
     notes,   mortgages,   deeds  of  trust,   security  agreements,   financing
     statements,  instruments,  documents and other  agreements as Lender or its
     attorneys  may  reasonably  request to evidence and secure the Loans and to
     perfect all Security Interests.

RECOVERY OF  ADDITIONAL  COSTS.  If the  imposition of or any change in any law,
rule,  regulation or guideline,  or the  interpretation  or  application  of any
thereof by any court or administrative or governmental  authority (including any
request or policy not  having  the force of law)  shall  impose,  modify or make
applicable  any taxes (except U.S.  federal,  state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other  obligations  which would (a) increase the cost to Lender for extending or
maintaining the credit  facilities to which this Agreement  relates,  (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents,  or
(c) reduce the rate of return on Lender's  capital as a consequence  of Lender's
obligations  with  respect to the  credit  facilities  to which  this  Agreement
relates,  then  Borrower  agrees to pay Lender such  additional  amounts as will
compensate  Lender therefor,  within five (5) days after Lender's written demand
for such payment,  which demand shall be  accompanied  by an explanation of such
imposition or charge and a calculation  in reasonable  detail of the  additional
amounts  payable  by  Borrower,  which  explanation  and  calculations  shall be
conclusive  in the  absence of  manifest  error.  

NEGATIVE  COVENANTS.  Borrower  covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender: 

     INDEBTEDNESS  AND LIENS.  (a) Except for trade debt  incurred in the normal
     course  of  business  and  indebtedness  to  Lender  contemplated  by  this
     Agreement,  create,  incur  or  assume  indebtedness  for  borrowed  money,
     including capital leases, (b) sell,  transfer,  mortgage,  assign,  pledge,
     lease,  grant a security interest in, or encumber any of Borrower's assets,
     or (c) sell with recourse any of Borrower's accounts, except to Lender.

     CONTINUITY   OF   OPERATIONS.   (a)  Engage  in  any  business   activities
     substantially  different than those in which Borrower is presently engaged,
     (b) cease operations,  liquidate,  merge, transfer,  acquire or consolidate
     with any other  entity,  change  ownership,  change its name,  dissolve  or
     transfer or sell Collateral out of the ordinary course of business, (c) pay
     any  dividends on  Borrower's  stock (other than  dividends  payable in its
     stock),  provided,  however that notwithstanding the foregoing, but only so
     long as no Event of Default has occurred and is  continuing or would result
     from the payment of dividends,  if Borrower is a "Subchapter S Corporation"
     (as defined in the Internal Revenue Code of 1986, as amended), Borrower may
     pay cash  dividends on its stock to its  shareholders  from time to time in
     amounts  necessary to enable the  shareholders to pay income taxes and make
     estimated  income tax payments to satisfy their  liabilities  under federal
     and state law which arise  solely from their  status as  Shareholders  of a
     Subchapter S Corporation  because of their  ownership of shares of stock of
     Borrower, or (d) purchase or retire any of Borrower's outstanding shares or
     alter or amend Borrower's capital structure.

     LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
     assets,  (b)  purchase,  create  or  acquire  any  interest  in  any  other
     enterprise  or entity,  or (c) incur any  obligation as surety or guarantor
     other than in the ordinary course of business.

CESSATION OF  ADVANCES.  If Lender has made any  commitment  to make any Loan to
Borrower,  whether  under this  Agreement or under any other  agreement,  Lender
shall have no  obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the  Related  Documents  or any  other  agreement  that  Borrower  or any
Guarantor  has with Lender;  (b) Borrower or any  Guarantor  becomes  insolvent,
files a  petition  in  bankruptcy  or  similar  proceedings,  or is  adjudged  a
bankrupt;  (c) there occurs a material  adverse  change in Borrower's  financial
condition,  in the financial condition of any Guarantor,  or in the value of any
Collateral  securing  any Loan;  (d) any  Guarantor  seeks,  claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure,  even
though no Event of Default shall have occurred.

ADDITIONAL PROVISIONS.

The following additional provisions are a part of this Agreement:

     SERVICE CHARGE. In addition to the required payments under the Indebtedness
and this Agreement, Borrower shall pay Lender's then current service charges for
servicing, examining, and inspecting in connection with this Agreement.

     ADDITIONAL INFORMATION.  Borrower shall provide Lender with complete copies
of Borrower's Federal income tax returns, as filed, as soon as available, but in
no event later than thirty (30) days after each return has been filed.

     LENDER EXAMS. Annual Lender exams may be performed,  at Lender's option, or
at Lender's request,  by Lender  designated  personnel,  at Borrower's  expense.
Security and Exchange  Commission  Reports.  Borrower  shall provide Lender with
Security and Exchange Commission Report's 10K.

RIGHT OF SETOFF.  Borrower grants to Lender a contractual  security interest in,
and hereby  assigns,  conveys,  delivers,  pledges,  and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's  accounts with Lender
(whether checking, savings, or some other account), including without limitation
all accounts  held jointly with someone else and all accounts  Borrower may open
in the  future,  excluding  however  all IRA and Keogh  accounts,  and all trust
accounts for which the grant of a security  interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.

EVENTS OF DEFAULT.  Each of the following  shall  constitute an Event of Default
under this Agreement:

     DEFAULT ON  INDEBTEDNESS.  Failure of Borrower to make any payment when due
     on the Loans.

     OTHER  DEFAULTS.  Failure of  Borrower  or any Grantor to comply with or to
     perform  when  due  any  other  term,  obligation,  covenant  or  condition
     contained in this Agreement or in any of the Related Documents,  or failure
     of  Borrower  to comply  with or to  perform  any other  term,  obligation,
     covenant or condition  contained in any other agreement  between Lender and
     Borrower.

     DEFAULT IN FAVOR OF THIRD PARTIES.  Should  Borrower or any Grantor default
     under any loan, extension of credit, security agreement,  purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or


<PAGE>

07-31-1998                        LOAN AGREEMENT                          Page 7
Loan No 1001-R1                    (Continued)
================================================================================

     Borrower's  or any  Grantor's  ability to repay the Loans or perform  their
     respective   obligations  under  this  Agreement  or  any  of  the  Related
     Documents.

     FALSE  STATEMENTS.  Any  warranty,  representation  or  statement  made  or
     furnished  to Lender by or on behalf of Borrower or any Grantor  under this
     Agreement or the Related  Documents is false or  misleading in any material
     respect at the time made or  furnished,  or becomes  false or misleading at
     anytime thereafter.

     DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
     ceases to be in full force and effect  (including  failure of any  Security
     Agreement to create a valid and  perfected  Security  Interest) at any time
     and for any reason.

     INSOLVENCY.  The  dissolution or  termination of Borrower's  existence as a
     going business,  the insolvency of Borrower,  the appointment of a receiver
     for any part of  Borrower's  property,  any  assignment  for the benefit of
     creditors,  any  type  of  creditor  workout,  or the  commencement  of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     CREDITOR  OR  FORFEITURE   PROCEEDINGS.   Commencement  of  foreclosure  or
     forfeiture   proceedings,   whether  by  judicial  proceeding,   self-help,
     repossession or any other method, by any creditor of Borrower, any creditor
     of any Grantor against any collateral securing the Indebtedness,  or by any
     governmental agency. This includes a garnishment, attachment, or levy on or
     of any of Borrower's deposit accounts with Lender.  However,  this Event of
     Default  shall not apply if there is a good faith  dispute by  Borrower  or
     Grantor,  as the case may be, as to the validity or  reasonableness  of the
     claim which is the basis of the creditor or forfeiture  proceeding,  and if
     Borrower  or  Grantor  gives  Lender  written  notice  of the  creditor  or
     forfeiture  proceeding  and  furnishes  reserves  or a surety  bond for the
     creditor or forfeiture proceeding satisfactory to Lender.

     EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
     to any  Guarantor  of any of the  Indebtedness  or any  Guarantor  dies  or
     becomes  incompetent,  or revokes or disputes the validity of, or liability
     under, any Guaranty of the Indebtedness.  Lender,  at its option,  may, but
     shall  not  be  required  to,  permit  the  Guarantor's  estate  to  assume
     unconditionally  the  obligations  arising  under  the  guaranty  in manner
     satisfactory to Lender, and, in doing so, cure the Event of Default.

     CHANGE IN OWNERSHIP.  Any change in ownership of twenty-five  percent (25%)
     or more of the common stock of Borrower.

     ADVERSE CHANGE.  A material  adverse change occurs in Borrower's  financial
     condition, or Lender believes the prospect of payment or performance of the
     Indebtedness is impaired.

     INSECURITY. Lender, in good faith, deems itself insecure.

     RIGHT TO CURE.  If any default,  other than a Default on  Indebtedness,  is
     curable and if Borrower or Grantor,  as the case may be, has not been given
     a notice of a similar default within the preceding  twelve (12) months,  it
     may be cured (and no Event of Default  will have  occurred)  if Borrower or
     Grantor,  as the case may be, after  receiving  written  notice from Lender
     demanding  cure of such default:  (a) cures the default  within thirty (30)
     days; or (b) if the cure  requires more than thirty (30) days,  immediately
     initiates  steps which  Lender  deems in  Lender's  sole  discretion  to be
     sufficient to cure the default and  thereafter  continues and completes all
     reasonable and necessary steps sufficient to produce  compliance as soon as
     reasonably practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related  Documents,  all commitments
and  obligations of Lender under this Agreement or the Related  Documents or any
other  agreement  immediately  will terminate  (including any obligation to make
Loan  Advances or  disbursements),  and,  at Lenders  option,  all  Indebtedness
immediately  will  become due and  payable,  all  without  notice of any kind to
Borrower,  except that in the case of an Event of Default of the type  described
in the "Insolvency"  subsection above, such acceleration  shall be automatic and
not  optional.  In  addition,  Lender  shall have all the  rights  and  remedies
provided in the Related  Documents or available at law, in equity, or otherwise.
Except as may be  prohibited  by  applicable  law,  all of  Lender's  rights and
remedies  shall be cumulative and may be exercised  singularly or  concurrently.
Election by Lender to pursue any remedy  shall not exclude  pursuit of any other
remedy,  and an  election to make  expenditures  or to take action to perform an
obligation  of  Borrower or of any Grantor  shall not affect  Lender's  right to
declare a default and to exercise its rights and remedies.

MISCELLANEOUS  PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

     AMENDMENTS.   This   Agreement,   together  with  any  Related   Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement.  No alteration of or amendment to this
     Agreement  shall be  effective  unless  given in writing  and signed by the
     party or  parties  sought  to be  charged  or bound  by the  alteration  or
     amendment.

     APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
     LENDER IN THE STATE OF ARIZONA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
     LENDER'S  REQUEST TO SUBMIT TO THE  JURISDICTION  OF THE COURTS OF MARICOPA
     COUNTY,  THE STATE OF  ARIZONA.  THIS  AGREEMENT  SHALL BE  GOVERNED BY AND
     CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.

     CAPTION  HEADINGS.  Caption  headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the  provisions
     of this Agreement.

     MULTIPLE PARTIES;  CORPORATE  AUTHORITY.  All obligations of Borrower under
     this Agreement  shall be joint and several,  and all references to Borrower
     shall mean each and every  Borrower.  This  means that each of the  persons
     signing below is responsible for all obligations in this Agreement.

     CONSENT TO LOAN  PARTICIPATION.  Borrower  agrees and  consents to Lender's
     sale or  transfer,  whether  now or  later,  of one or  more  participation
     interests  in the  Loans  to one or more  purchasers,  whether  related  or
     unrelated to Lender. Lender may provide, without any limitation whatsoever,
     to any one or more purchasers, or potential purchasers,  any information or
     knowledge Lender may have about Borrower or about any other matter relating
     to the Loan,  and Borrower  hereby waives any rights to privacy it may have
     with  respect to such  matters.  Borrower  additionally  waives any and all
     notices of sale of participation  interests,  as well as all notices of any
     repurchase of such participation  interests.  Borrower also agrees that the
     purchasers of any such  participation  interests  will be considered as the
     absolute owners of such interests in the Loans and will have all the rights
     granted under the participation  agreement or agreements governing the sale
     of such  participation  interests.  Borrower  further  waives all rights of
     offset  or  counterclaim  that it may have now or later  against  Lender or
     against any purchaser of such a participation  interest and unconditionally
     agrees  that  either  Lender  or  such  purchaser  may  enforce  Borrower's
     obligation under the Loans irrespective of the failure or insolvency of any
     holder of any  interest  in the Loans.  Borrower  further  agrees  that the
     purchaser of any such  participation  interests  may enforce its  interests
     irrespective  of any  personal  claims or defenses  that  Borrower may have
     against Lender.

     COSTS AND  EXPENSES.  Borrower  agrees to pay upon  demand all of  Lender's
     expenses,   including  without  limitation  attorneys'  fees,  incurred  in
     connection with the preparation,  execution, enforcement,  modification and
     collection of this Agreement or in connection  with the Loans made pursuant
     to this  Agreement.  Lender may pay someone  else to help collect the Loans
     and to enforce  this  Agreement,  and Borrower  will pay that amount.  This
     includes,  subject to any limits under applicable law, Lender's  attorneys'
     fees and  Lender's  legal  expenses,  whether  or not  there is a  lawsuit,
     including attorneys' fees for bankruptcy  proceedings (including efforts to
     modify  or vacate  any  automatic  stay or  injunction),  appeals,  and any
     anticipated  post-judgment collection services.  Borrower also will pay any
     court costs, in addition to all other sums provided by law.

     NOTICES.  All notices  required to be given under this  Agreement  shall be
     given in writing,  may be sent by telefacsimile  (unless otherwise required
     by law), and shall be effective  when actually  delivered or when deposited
     with a nationally  recognized  overnight courier or deposited in the United
     States mail, first class,  postage prepaid,  addressed to the party to whom
     the notice is to be given at the address shown above. Any party may


<PAGE>

07-31-1998                       LOAN AGREEMENT                           Page 8
Loan No 1001-R1                   (Continued)
================================================================================

     change its  address  for  notices  under this  Agreement  by giving  formal
     written  notice to the other  parties,  specifying  that the purpose of the
     notice is to  change  the  party's  address.  To the  extent  permitted  by
     applicable law, if there is more than one Borrower,  notice to any Borrower
     will constitute notice to all Borrowers. For notice purposes, Borrower will
     keep Lender informed at all times of Borrower's current address(es).

     SEVERABILITY.  It a court of competent  jurisdiction finds any provision of
     this  Agreement  to be  invalid  or  unenforceable  as  to  any  person  or
     circumstance,  such  finding  shall not render  that  provision  invalid or
     unenforceable as to any other persons or  circumstances.  If feasible,  any
     such  offending  provision  shall be deemed to be modified to be within the
     limits of enforceability or validity;  however,  if the offending provision
     cannot be so  modified,  it shall be stricken and all other  provisions  of
     this Agreement in all other respects shall remain valid and enforceable.

     SUBSIDIARIES  AND AFFILIATES OF BORROWER.  To the extent the context of any
     provisions  of this  Agreement  makes  it  appropriate,  including  without
     limitation any representation, warranty or covenant, the word "Borrower" as
     used herein  shall  include all  subsidiary  and  affiliates  of  Borrower.
     Notwithstanding  the foregoing however,  under no circumstances  shall this
     Agreement  be  construed  to  require  Lender  to make  any  Loan or  other
     financial accommodation to any subsidiary or affiliate of Borrower.

     SUCCESSORS  AND ASSIGNS.  All covenants and  agreements  contained by or on
     behalf of Borrower shall bind its successors and assigns and shall inure to
     the benefit of Lender,  its  successors  and assigns.  Borrower  shall not,
     however,  have the right to assign its rights  under this  Agreement or any
     interest therein, without the prior written consent of Lender.

     SURVIVAL. All warranties,  representations,  and covenants made by Borrower
     in this Agreement or in any  Certificate or other  instrument  delivered by
     Borrower to Lender under this  Agreement  shall be  considered to have been
     relied upon by Lender and will  survive the making of the Loan and delivery
     to Lender of the Related Documents, regardless of any investigation made by
     Lender or on Lender's behalf.

     TIME IS OF THE ESSENCE.  Time is of the essence in the  performance of this
     Agreement.

     WAIVER.  Lender  shall not be deemed to have  waived any rights  under this
     Agreement  unless such waiver is given in writing and signed by Lender.  No
     delay or  omission  on the part of Lender  in  exercising  any right  shall
     operate as a waiver of such right or any other right. A waiver by Lender of
     a provision of this Agreement shall not prejudice or constitute a waiver of
     Lender's right otherwise to demand strict compliance with that provision or
     any other provision of this Agreement.  No prior waiver by Lender,  nor any
     course of dealing  between  Lender and Borrower,  or between Lender and any
     Grantor,  shall  constitute  a waiver of any of  Lender's  rights or of any
     obligations  of Borrower  or of any Grantor as to any future  transactions.
     Whenever  the  consent  of Lender is  required  under this  Agreement,  the
     granting of such  consent by Lender in any  instance  shall not  constitute
     continuing consent in subsequent  instances where such consent is required,
     and in all cases  such  consent  may be  granted  or  withheld  in the sole
     discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JULY 31, 1998.

BORROWER:  

RECONDITIONED SYSTEMS, INC.

By: /s/ DIRK ANDERSON
--------------------------------------------
         DIRK ANDERSON, CFO

LENDER:

M&I THUNDERBIRD BANK, AN ARIZONA CORPORATION

By:  /s/ JEFFREY LeBAR
--------------------------------------------
          Authorized Officer


<PAGE>

                             M & I THUNDERBIRD BANK
                            CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
<S>            <C>         <C>         <C>        <C>    <C>         <C>          <C>      <C>  
Principal      Loan Date   Maturity    Loan No    Call   Collateral  Account      Officer  Initials
$1,000,000.00              07-31-1999  1001 - R1                     09400069235    JLL

---------------------------------------------------------------------------------------------------
References  in the  shaded  area are for  Lender's  use only and do not limit the  applicability of 
this document to any particular loan or items.
---------------------------------------------------------------------------------------------------

BORROWER:  RECONDITIONED SYSTEMS, INC.    LENDER:  M&I THUNDERBIRD BANK, AN ARIZONA CORPORATION
           444 WEST FAIRMONT                       SCOTTSDALE RD. & THUNDERBIRD OFFICE (10)
           TEMPE, AZ 85282                         C/O LOAN SUPPORT DEPARTMENT
                                                   ONE EAST CAMELBACK ROAD
                                                   PHOENIX, AZ 85012-1647

===================================================================================================
</TABLE>
PRINCIPAL AMOUNT:  $1,000,000                   DATE OF AGREEMENT: JULY 31, 1998



DESCRIPTION OF EXISTING INDEBTEDNESS.  Promissory Note originally dated July 30,
1997,  in the  original  principal  amount of  $1,000,000.00,  and any  renewals
thereof.

DESCRIPTION OF CHANGE IN TERMS. The maturity date is hereby extended to July 31,
1999. The interest rate is hereby changed as described in the Variable  Interest
Rate section of this Agreement.

PROMISE TO PAY.  RECONDITIONED SYSTEMS, INC. ("BORROWER") PROMISES TO PAY TO M&I
THUNDERBIRD BANK, AN ARIZONA CORPORATION  ("LENDER"),  OR ORDER, IN LAWFUL MONEY
OF THE UNITED STATES OF AMERICA,  THE  PRINCIPAL  AMOUNT OF ONE MILLION & 00/100
DOLLARS ($1,000,000.00) OR SO MUCH AS MAY BE OUTSTANDING, TOGETHER WITH INTEREST
ON THE UNPAID OUTSTANDING  PRINCIPAL BALANCE OF EACH ADVANCE.  INTEREST SHALL BE
CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.

PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING PRINCIPAL
PLUS ALL ACCRUED  UNPAID  INTEREST ON JULY 31, 1999. IN ADDITION,  BORROWER WILL
PAY REGULAR  MONTHLY  PAYMENTS OF ACCRUED UNPAID INTEREST  BEGINNING  AUGUST 29,
1998, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH
AFTER THAT. The annual interest rate for this Agreement is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days,  multiplied by the outstanding  principal  balance,  multiplied by the
actual number of days the principal  balance is  outstanding.  Borrower will pay
Lender at  Lender's  address  shown  above or at such other  place as Lender may
designate in writing.  Unless  otherwise  agreed or required by applicable  law,
payments  will be  applied  first to any  unpaid  collection  costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.

VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to change
from time to time based on changes in an index which is Lender's Prime Rate (the
"Index").  This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers.  This rate may or may not be
the lowest  rate  available  from  Lender at any given  time.  Lender  will tell
Borrower the current Index rate upon Borrower's  request.  Borrower  understands
that  Lender may make loans  based on other  rates as well.  The  interest  rate
change will not occur more often than each day.  THE INDEX  CURRENTLY  IS 8.500%
PER ANNUM.  THE INTEREST RATE TO BE APPLIED TO THE UNPAID  PRINCIPAL  BALANCE OF
THIS  AGREEMENT  WILL BE AT A RATE EQUAL TO THE INDEX,  RESULTING  IN AN INITIAL
RATE OF 8.500% PER ANNUM.  NOTICE: Under no circumstances will the interest rate
on this Agreement be more than the maximum rate allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are  earned  fully as of the date of the loan and will not be  subject to refund
upon early  payment  (whether  voluntary or as a result of  default),  except as
otherwise  required by law.  Except for the foregoing,  Borrower may pay without
penalty  all or a portion  of the  amount  owed  earlier  than it is due.  Early
payments will not,  unless agreed to by Lender in writing,  relieve  Borrower of
Borrower's  obligation to continue to make payments of accrued unpaid  interest.
Rather, they will reduce the principal balance due.

LATE  CHARGE.  If a payment  is 10 DAYS OR MORE LATE,  Borrower  will be charged
5.000% OF THE REGULARLY SCHEDULED PAYMENT.

DEFAULT.  Borrower  will be in  default  if any of the  following  happens:  (a)
Borrower  fails to make any payment when due.  (b)  Borrower  breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any  other  term,  obligation,  covenant,  or  condition  contained  in this
Agreement or an agreement  related to this Agreement,  or in any other agreement
or loan  Borrower  has with  Lender.  (c)  Borrower  defaults  under  any  loan,
extension of credit,  security  agreement,  purchase or sales agreement,  or any
other  agreement,  in favor of any other  creditor or person that may materially
affect any of Borrower's  property or  Borrower's  ability to repay this Note or
perform Borrower's  obligations under this Note or any of the Related Documents.
(d) Any  representation  or statement made or furnished to Lender by Borrower or
on Borrower's  behalf is false or misleading in any material  respect either now
or at the time made or furnished.  (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property,  Borrower makes an assignment for
the benefit of creditors,  or any proceeding is commenced  either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's  property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any  guarantor  dies or any of the other  events  described  in this default
section occurs with respect to any guarantor of this  Agreement.  (h) A material
adverse change occurs in Borrower's financial condition,  or Lender believes the
prospect of payment or performance of the  Indebtedness is impaired.  (I) Lender
in good faith deems itself insecure.

If any default,  other than a default in payment, is curable and if Borrower has
not been  given a notice of a breach  of the same  provision  of this  Agreement
within  the  preceding  twelve  (12)  months,  it may be cured  (and no event of
default will have  occurred) if Borrower,  after  receiving  written notice from
Lender demanding cure of such default:  (a) cures the default within thirty (30)
days;  or (b) if the cure  requires  more than  thirty  (30)  days,  immediately
initiates  steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and  thereafter  continues and completes all  reasonable and
necessary  steps  sufficient  to  produce   compliance  as  soon  as  reasonably
practical.

LENDER'S  RIGHTS.  Upon default,  Lender may declare the entire unpaid principal
balance on this  Agreement  and all accrued  unpaid  interest  immediately  due,
without notice, and then Borrower will pay that amount. Upon default,  including
failure  to pay upon  final  maturity,  Lender,  at its  option,  may  also,  if
permitted  under  applicable  law,  increase the variable  interest rate on this
Agreement to 5.000 percentage  points over the Index. The interest rate will not
exceed the maximum rate  permitted  by  applicable  law.  Lender may hire or pay
someone else to help collect this  Agreement if Borrower does not pay.  Borrower
also will pay Lender that  amount.  This  includes,  subject to any limits under
applicable law, Lender's  attorneys' fees and Lender's legal expenses whether or
not  there is a  lawsuit,  including  attorneys'  fees and  legal  expenses  for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction),  appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law,  Borrower also will pay any court costs, in
addition to all other sums provided by law. THIS AGREEMENT HAS BEEN DELIVERED TO
LENDER AND  ACCEPTED BY LENDER IN THE STATE OR  ARIZONA.  IF THERE IS A LAWSUIT,
BORROWER  AGREES  UPON  LENDER'S  REQUEST TO SUBMIT TO THE  JURISDICTION  OF THE
COURTS  OF  MARICOPA  COUNTY,  THE STATE OF  ARIZONA.  THIS  AGREEMENT  SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.

RIGHT OF SETOFF.  Borrower grants to Lender a contractual  security interest in,
and hereby  assigns,  conveys,  delivers,  pledges,  and transfers to Lender all
Borrower's right, title and interest in and to, Borrower's  accounts with Lender
(whether checking savings, or some other account), including


<PAGE>

07-31-1998                 CHANGES IN TERMS AGREEMENT                     PAGE 2
LOAN NO 1001-R1                   (CONTINUED)
================================================================================

without  limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future,  excluding  however all IRA and Keogh accounts,
and all trust  accounts  for which the  grant of a  security  interest  would be
prohibited  by law.  Borrower  authorizes  Lender,  to the extent  permitted  by
applicable law, to charge or setoff all sums owing on this Agreement against any
and all such accounts.

LINE OF CREDIT.  This Agreement  evidences a revolving line of credit.  Advances
under this Agreement may be requested either orally or in writing by Borrower or
by an  authorized  person.  Lender  may,  but need  not,  require  that all oral
requests  be  confirmed  in  writing.  All  communications,   instructions,   or
directions  by  telephone  or otherwise to Lender are to be directed to Lender's
office shown above.  The  following  party or parties are  authorized to request
advance under the line of credit until Lender receives from Borrower at Lender's
address shown above  written  notice of  revocation  of their  authority:  WAYNE
COLLIGNON,  PRESIDENT;  AND DIRK ANDERSON, CFO. Borrower agrees to be liable for
all  sums  either:  (a)  advanced  in  accordance  with the  instructions  of an
authorized person or (b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Agreement at any time may be evidenced by
endorsements on this Agreement or by Lender's internal records,  including daily
computer print-outs.  Lender will have no obligation to advance funds under this
Agreement  if: (a) Borrower or any  guarantor  is in default  under the terms of
this  Agreement or any agreement that Borrower or any guarantor has with Lender,
including any agreement made in connection  with the signing of this  Agreement;
(b) Borrower or any guarantor  ceases doing  business or is  insolvent;  (c) any
guarantor seeks,  claims or otherwise  attempts to limit,  modify or revoke such
guarantor's  guarantee  of this  Agreement  or any other loan with  Lender;  (d)
Borrower has applied funds provided pursuant to his Agreement for purposes other
than those  authorized  by Lender;  or (e)  Lender in good  faith  deems  itself
insecure  under  this  Agreement  or any  other  agreement  between  Lender  and
Borrower.

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original  obligation or obligations,  including all agreements  evidenced or
securing  the  obligation(s),  remain  unchanged  and in full force and  effect.
Consent  by Lender to this  Agreement  does not waive  Lender's  right to strict
performance of the  obligation(s)  as changed,  nor obligate  Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s).  It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligations(s),including  accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement.  If any person who signed the original  obligation does not sign this
Agreement below,  then all persons signing below acknowledge that this Agreement
is  given  conditionally,  based  on  the  representation  to  Lender  that  the
non-signing  party  consents to the changes and  provisions of this Agreement or
otherwise  will not be  released  by it.  This  waiver  applies  not only to any
initial  extension,  modification  or release,  but also to all such  subsequent
actions.

ADDITIONAL  PROVISIONS.  NOTICE TO ALL  COMMERCIAL  LOAN  CUSTOMERS  WITH  LOANS
GREATER THAT  $250,000.00:  Effective  September  5, 1989,  only  agreements  IN
WRITING are  enforceable  in the event there are  disagreements  over this loan.
This includes all agreements or understandings to loan money, to grant or extend
credit, or to extend,  renew, or modify a loan. For further information,  please
refer to A.R.S. 44-101-9, or contact your loan officer.

MISCELLANEOUS PROVISIONS.  Lender may delay or forgo enforcing any of its rights
or remedies  under this Agreement  without  losing them.  Borrower and any other
person who signs, guarantees or endorse this Agreement, to the extent allowed by
law, waive presentment, demand for payment, protest and notice of dishonor. Upon
any change in the terms of this Agreement, and unless otherwise expressly stated
in  writing,  no party who signs this  Agreement,  whether as maker,  guarantor,
accommodation  maker or endorser,  shall be released  from  liability.  All such
parties agree that Lender may renew or extend  (repeatedly and for any length of
time) this loan,  or release any party or  guarantor or  collateral;  or impair,
fail to realize anyone.  All such parties also agree that Lender may modify this
loan  without the consent of or notice to anyone  other than the party with whom
the modification is made.

EFFECTIVE  RATE.  Borrower  agrees to an effective  rate of interest that is the
rate  specified in this Note plus any  additional  rate resulting from any other
charges in the nature of  interest  paid or to be paid in  connection  with this
Note.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS AGREEMENT,  INCLUDING THE VARIABLE  INTEREST RATE  PROVISIONS.  BORROWER
AGREES TO THE TERMS OF THE  AGREEMENT  AND  ACKNOWLEDGES  RECEIPT OF A COMPLETED
COPY OF THE AGREEMENT.

BORROWER:  

RECONDITIONED SYSTEMS, INC.

By: /s/ DIRK ANDERSON
----------------------------------------
    DIRK ANDERSON, CFO

<PAGE>
                              M&I THUNDERBIRD BANK
                     DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
<S>            <C>         <C>         <C>        <C>    <C>         <C>          <C>      <C>  
Principal      Loan Date   Maturity    Loan No    Call   Collateral  Account      Officer  Initials
$1,000,000.00              07-31-1999  1001 - R1                     09400069235    JLL

---------------------------------------------------------------------------------------------------
References  in the  shaded  area are for  Lender's  use only and do not limit the  applicability of 
this document to any particular loan or items.
---------------------------------------------------------------------------------------------------

BORROWER:  RECONDITIONED SYSTEMS, INC.    LENDER:  M&I THUNDERBIRD BANK, AN ARIZONA CORPORATION
           444 WEST FAIRMONT                       SCOTTSDALE RD. & THUNDERBIRD OFFICE (10)
           TEMPE, AZ 85282                         C/O LOAN SUPPORT DEPARTMENT
                                                   ONE EAST CAMELBACK ROAD
                                                   PHOENIX, AZ 85012-1647

===================================================================================================
</TABLE>

LOAN TYPE. This is a Variable Rate (at M&I Thunderbird  Bank  Fluctuating  Prime
Rate,  making an initial  rate of  8.500%),  Revolving  Line of Credit Loan to a
Corporation for $1,000,000.00 due on July 31, 1999.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

          [ ]  PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT.

          [X]  BUSINESS ( INCLUDING REAL ESTATE INVESTMENT).

SPECIFIC  PURPOSE.  The  specific  purpose of this loan is:  Support  A/R,  Inv.
purchases and working capital.

DISBURSEMENT  INSTRUCTIONS.  Borrower  understands that no loan proceeds will be
disbursed  until  all of  Lender's  conditions  for  making  the loan  have been
satisfied. Please disburse the loan proceeds of $1,000,000.00 as follows:

          AMOUNT PAID TO OTHERS ON BORROWER'S BEHALF:              $1,000,000.00
          $1,000,000.00 Renew Note #1001 with balance as directed  
                                                                   -------------
          NOTE PRINCIPAL:                                          $1,000,000.00

CHARGES  PAID IN  CASH.  Borrower  has paid or will  pay in cash as  agreed  the
following charges:

          PREPAID FINANCE CHARGES PAID IN CASH:                    $    3,750.00
                $3,750.00 Loan Fees
                                                                   -------------

          TOTAL CHARGES PAID IN CASH:                              $    3,750.00

APPRAISAL.  If this credit is secured by a lien on a dwelling  and an  appraisal
report is used in connection with this  application,  you will receive a copy of
the Appraisal Report within thirty (30) days of our receipt of the report or our
reimbursement for the report, whichever occurs last.

FINANCIAL  CONDITION.  BY SIGNING THIS  AUTHORIZATION,  BORROWER  REPRESENTS AND
WARRANTS TO LENDER THAT THE  INFORMATION  PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IS BORROWER'S FINANCIAL CONDITION
AS DISCLOSED  IN  BORROWER'S  MOST RECENT  FINANCIAL  STATEMENT TO LENDER.  THIS
AUTHORIZATION IS DATED JULY 31, 1998.

BORROWER:  

RECONDITIONED SYSTEMS, INC.

By: /s/ DIRK ANDERSON
----------------------------------------
    DIRK ANDERSON, CFO